GAP insurance – how am I affected by the changes?
April 10, 2024Do you have or did you think about arranging GAP (Guaranteed Asset Protection) insurance when raising the finance to buy your car or motorcycle? Either way, you will have discovered that many GAP insurance providers – under pressure from the Financial Conduct Authority (FCA) – have agreed to temporarily suspend the issue of any new GAP policies for the time being.
What is GAP insurance?
GAP insurance has been built around a fairly simple principle. It offers buyers of motor vehicles protection against potential financial losses. These can result from the difference between any outstanding finance – or the purchase price of the vehicle – and its actual current market value if it is damaged beyond repair and written off while there is still an outstanding balance of finance to be repaid.
What has happened?
GAP insurance appears to be a quite simple but useful way of protecting the finance you have locked up in your car. So, why has the FCA pressed providers to pause further sales of this useful product?
Following an investigation of this particular sector of the insurance market, the FCA became concerned about the value for money of the products on offer. It concluded that providers could do more to ensure that consumers received better value for money through the offer of fairer deals. In response to the FCA’s initial request, some 80% of providers agreed to suspend further sales of GAP insurance – and it is hoped that the remaining 20% will soon follow suit.
One of the ways in which GAP insurance has been sold, for example, is as an “add-on” to an otherwise essential insurance package arranged at the time of purchasing the vehicle. In the view of the FCA, buyers may have been subject to undue and ultimately unfair pressure to agree to the add-on in the heat of the moment.
Until insurers and providers can offer GAP insurance that meets the current standards expected by the FCA, from 1st of April 2024 the majority of the industry has agreed to suspend the sale of such products for the time being.
Can I still make a claim under my GAP insurance?
It is important to emphasise that existing policyholders of GAP insurance are completely unaffected by the recent agreement made between the FCA and insurance providers.
Existing policyholders can rest assured that their GAP insurance remains valid. If you need to make a claim, there is no danger that the recent industry agreement will result in the cancellation of that claim or your policy.
Understanding what cover you have
One of the more general findings revealed in the FCA’s recent investigation of this sector of the motor insurance market is that many consumers may have no clear or comprehensive understanding of just what their policies cover – and what they do not.
A reason for that might be the pressure under which some consumers may have been sold insurance packages at the same time they were purchasing their car or motorcycle. Add-ons and extras purchased at that time might become forgotten or unnecessary elements of cover over time.
For those reasons, it is worth remembering how valuable it can be to ask a reputable broker to take care of all of your insurance needs, such as us here at Alan Blunden. We can keep everything under the same roof, providing professional reassurance, checking that you have the most appropriate cover to meet your requirements, ensuring that any extras or add-ons are those you truly need, and remaining ever ready to help you in making any insurance claim if and when the time comes.