Introduction
The Financial Conduct Authority (FCA) has communicated to insurers that they must act to ensure that their products provide fair value to their customers. The FCA has highlighted Guaranteed Asset Protection (GAP) Insurance as a key product that may need revaluing.
This is an important topic covering various insurance policies; if you want GAP insurance for a new personal car or maybe a work van or taxi, this is good news. The FCA states that "customers should be reassured that we're in their corner and are taking action where we see poor value being provided." they also threatened that if firms are unable to prove they're providing fair value to their customers after the reviews, they should expect further action from their regulator.
Why has GAP insurance been targeted
GAP insurance covers the gap between what your standard car insurance pays for a written-off vehicle and the amount you still owe on your loan or lease (or the original purchase price if you own it outright). While the FCA is reviewing many insurance policies, it has highlighted GAP insurance as a key area of concern. According to the FCA, only 6% of the premiums customers pay for GAP insurance are paid out in claims. This low distribution was enough to put GAP insurance on the FCA radar. Other insurances under the FCA fair value scope
GAP insurance isn't the only product insurers have received a fair value warning over, and motorists aren't the only people who might benefit from such warnings. Here is a list of other insurance products that the FCA has sent letters regarding:
Retail Insurance
Wholesale Insurance
Life Insurance
Funeral Plans
Conclusion The FCA seeking fair value will undoubtedly offer an extra layer of confidence for those considering getting GAP insurance or other policies. The FCA holds a lot of power in the financial world, and it will be interesting to see what they do in the future to protect consumers. For more insights and updates on financial matters that affect you, follow Short and Sons Accountants and check out our other articles!