First published: 28th August 2015
From the beginning of September, new regulations governing the sale of GAP (Guaranteed Asset Protection) Insurance will come into force. These rules have been put in place by the Financial Conduct Authority, which expects that they will lead to savings for consumers of between £31 and £54 million per year.
The new rules apply to "firms distributing GAP insurance in connection with the sale of a motor vehicle", and they have two main stipulations:
- First, firms must provide customers with prescribed information to help them to shop around and make a more informed decision when purchasing GAP insurance.
- Second, firms must adhere to a four-day deferral period, meaning that add-on GAP insurance cannot be introduced and the sale of it concluded on the same day.
Independent GAP Insurance provider ALA believes that the new rules will greatly benefit consumers by making it easier for them to shop around. Add-on GAP insurance premiums bought via car dealers are often significantly higher than stand-alone prices, and they represent poor value to the customer.
For a long time, car dealers have been using add-ons such as GAP insurance as a way for sales staff to earn commission. However, the new FCA rules insist that, before a GAP contract is concluded, a firm must draw to the customer’s attention the following information in a clear and accurate manner:
- The total premium of the add-on GAP policy, separate from any other prices
- Significant features and benefits, significant and unusual exclusions or limitations, and cross-references to the relevant policy document provisions
- The fact that standalone GAP contracts are sold by other distributors (whether or not the GAP contract is sold in connection with vehicle finance)
- The duration of the policy
- Whether the add-on GAP contract is optional or compulsory
- When the add-on GAP contract can be concluded by the firm
- The date the above information has been provided to the customer
The new rules state that an add-on GAP contract cannot be concluded by a firm with a customer until at least two clear days have passed since the prescribed information has been provided. This amounts to a “four day” deferred opt-in, but the customer can initiate the conclusion of the contract more quickly, if they choose to.
To buy GAP Insurance through Auto Trader, visit our GAP Insurance page