UK insurers halt motor-add on sales amid regulator concern
British insurers have agreed to pause sales of guaranteed asset protection insurance products following a request from the Financial Conduct Authority (FCA).
The authority says it made the request amid concerns the motor add-on products fail to provide fair value to some consumers. Guaranteed asset protection is typically sold alongside car finance and covers the difference between a vehicle’s purchase price or outstanding finance and its current market value, in the event it is written off before finance has been repaid.
Last September, the FCA wrote to guaranteed asset protection (GAP) insurance providers asking them to take immediate action to prove customers are getting a fair deal but the responses have not been satisfactory, the regulator says.
As part of the sales pause agreement with the authority, insurers have committed to change their products to provide better value for customers, in line with FCA rules.
“GAP insurance can provide a useful service to customers, but in its current form it does not offer fair value and we want to see improvements,” FCA Executive Director of Consumers and Competition Sheldon Mills said. “We will continue to work closely with firms as we carry out further engagement to resolve these issues and ensure customers are getting fair value products that meet their needs.”
Insurers that have agreed to pause GAP sales account for 80% of the market. They will not use new distributors until the FCA’s concerns have been addressed.
The authority says it has identified concerns with the design of the insurance across all distribution channels. It will consider providers’ proposals for different distribution channels, and recognises some channels may be able to address these concerns more quickly.