FCA warns Gap providers in insurance sector to prove fair value to customers

Are Gap insurance providers really offering fair value to customers? This is the question that the Financial Conduct Authority (FCA) has been asking in recent months. In a series of actions, the FCA has been cracking down on insurance providers in the Gap (guaranteed asset protection) market, warning them to prove that customers are getting good outcomes.

In January, Car Dealer Magazine exclusively revealed that the FCA had written to insurance providers, urging them to voluntarily withdraw their Gap products from sale. The regulator expressed concerns that Gap insurance, which is a significant revenue stream for car dealers, was not offering fair value to customers. As a result, the FCA asked insurers to suspend sales immediately.

In March, the FCA escalated its actions by requesting all Gap providers to pause sales of the product while it conducted further investigations. The regulator even asked the remaining providers to stop selling Gap insurance by the end of the month. However, in April, some insurance providers were granted a temporary extension on the moratorium.

Fast forward to May, and the FCA announced that a ‘significant proportion’ of firms were allowed to resume Gap sales after taking steps to improve fair value. In a report released today, the FCA highlighted issues with information sharing between insurers and brokers, as well as identifying target markets.

Matt Brewis, director of insurance at the FCA, emphasized the importance of insurers ensuring that customers receive fair value. He stated that while progress is being made, there are still too many examples of insurers and brokers lacking the necessary information, governance, or oversight to ensure consistently good outcomes for customers.

The FCA’s latest Value Measures Data, covering January to December 2023, serves as a warning to insurers that they must demonstrate compliance with rules and provide fair value to customers. Failure to do so may result in regulatory action.

Overall, the FCA’s actions in the Gap insurance market serve as a reminder to all insurance firms to prioritize fair value for customers. By making necessary improvements and ensuring compliance with regulations, insurers can instill confidence in consumers when purchasing insurance products.