GAP Insurance or Guaranteed Asset Protection Insurance is a product that protects perhaps our second most valuable purchase after our house… Our car.
As soon as a purchaser drives their new or second hand car off the dealers forecourt depreciation starts to take effect.
Let’s just say your client has bought their treasured vehicle on finance over three years and after six months their car is involved in a crash that renders the car a write off. The Insurers settlement offer will undoubtedly be less than the outstanding finance so will not clear the finance plan. A little bit of a problem for the driver who now needs to continue paying for a car they no longer have!
GAP Insurance protects the client from this unfortunate situation by meeting the difference.
GAP Insurance can also be provided on a RTI (Return to Invoice) basis and a Combined GAP/RTI basis.
The FCA has completed a detailed review of the way GAP has been sold.
The following observation is from their report (Ref CP14/29)
“We found in the Market Study that add-on GAP insurance distributors benefit from both a point-of-sale advantage and from customer inertia, which allows them to charge higher prices for GAP insurance in comparison with broadly equivalent standalone products.”
“We also found that the add-on mechanism resulted in potentially poor purchasing decision-making by the customer, where, for example, most did not research the product before buying it, despite the potential benefits of shopping around. For example, our Market Study found that 83% of buyers of add-on GAP insurance did not consider other policies when purchasing, compared to 9% of standalone GAP insurance buyers”
This in turn has led to the following proposal:
“A deferred opt-in period for customers when add-on GAP insurance is sold as part of buying a vehicle. This means GAP insurance cannot be introduced and sold on the same day. The deferral period would start when the customer is given certain prescribed pre-sale information and end four days after that information is provided (the four days includes the day the prescribed information is provided). We also propose a variation to enable a confident customer to make the purchase sooner if they wish to do so, at their own initiative”
So really good news for Brokers as that from this autumn the car dealer will no longer be able to sell the product at the point of car sale having to allow the customer a “cooling off” period and additionally make the customer aware that the Insurance can be obtained from other sources (i.e. their BTE Insurance Broker).
When a client notifies you that they are changing their vehicle it is the perfect time to raise the question of GAP and ask if they have thought about the cover, what benefits it can deliver and give a quote. The premium you can offer with Acasta for before the event gap insurance will almost certainly be cheaper than any offered by a dealer.
Acasta Europe’s rates offer Brokers a great opportunity now so if you haven’t already applied for an agency or hold an agency but not checked out or fantastic portal recently now’s the time.
For further information or to contact Acasta Europe Ltd, click here.
You can also follow us on social media
Where we share our observations, opinions and forward looking thoughts on the latest developments in the insurance industry.
