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    FCA concerns about fair value leads to GAP insurers suspending sales



    The Financial Conduct Authority (“FCA”) and a collective of Guaranteed Asset Protection (“GAP”) insurance providers have agreed to halt the sales of their GAP products.

    The regulator has confirmed that several insurers, which make up 80% of the guaranteed asset protection market, have agreed to pause sales following concerns around over fair value.

    GAP insurance is typically sold to consumers where they are purchasing a vehicle on finance and is designed to cover the financial gap between the purchase price of a vehicle (or the outstanding finance amount) and its market value at the time of loss.

    However, in September 2023, the FCA wrote to firms manufacturing GAP insurance products to request evidence that these products provide fair value to consumers.

    The responses to the information request from the FCA showed that only 6% of the amount customers pay in premiums for GAP insurance is paid out in claims. The regulator has seen examples of some firms paying out 70% of the value of insurance premiums in commission to parties involved in selling GAP policies.

    After assessing the response data, the FCA has agreed a pause in sales with relevant firms. As part of this agreement. GAP insurance providers have committed to make changes to their GAP products to provide better value for customers, in line with FCA rules.

    Fair Value

    Price and value is one of the 4 pillars of the Consumer Duty, along with products and services, consumer understanding and consumer support.

    Price and value

    Firms must ensure that their products offer fair value and conduct regular price and value assessments.

    This means that firms must offer products or services at a fair price which reflects the benefits of those products and services and protect consumers from unreasonably high fees and charges. Firms can assess whether their products and services offer fair value by taking steps to undertake monitoring such as;

    • Review of profitability and cost data
    • Review of associated fees and charges
    • Review of complaints
    • Monitoring surveys and social media ratings
    • Review of distribution chain and market data
    • Monitoring sales performance information
    • Reviewing customer usage data
    • Monitoring surveys and net promoter scores


    This latest intervention highlights the FCA’s commitment to enforcing the Consumer Duty principles and outcomes. We will continue to see more supervisory work from the FCA as they continue to ensure that firms have implemented the Consumer Duty appropriately and place customers at the centre of their business.

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