Many insurers and brokers are still failing to demonstrate they are offering fair value to customers despite industry efforts to improve governance and oversight regarding Guaranteed Asset Protection (GAP) products.
GAP insurance is an add-on to motor insurance and covers the difference between a vehicle’s purchase price and its current market value.
Earlier this year, the FCA said its data showed that there had been cases where only 6% of the amount customers paid in premiums was paid out in claims with some firms paying out up to 70% of the value of insurance premiums in commission to parties in the distribution chain, such as dealerships.
As a result, firms offering this type of insurance were given a three-month ultimatum by the regulator in February to take immediate action, or risk intervention. Some firms were allowed to resume offering GAP add-on sales in May.
In a new report, the Financial Conduct Authority (FCA) flags ongoing challenges particularly in information sharing between insurers and brokers, as well as in accurately identifying target markets.
