Global menu

Our global pages

Closing the GAP: Guaranteed Asset Protection insurance - competition remedy

Closing the GAP: Guaranteed Asset Protection insurance - competition remedy

  • United Kingdom
  • Insurance and reinsurance
  • Automotive
  • Financial institutions
  • Retail


New rules in the FCA’s policy statement on Guaranteed Asset Protection (GAP) insurance (PS15/13) are about to change the way GAP insurance sold alongside the sale of a motor vehicle (add-on GAP Insurance) is sold to both consumers and commercial customers.

From 1 September 2015, motor dealers and other distributors of add-on GAP insurance will no longer be permitted to introduce and conclude a sale of the insurance on the same day.

The FCA’s recent Market Study showed that buyers of add-on GAP insurance are:

  • less likely to shop around and less sensitive to price.
  • more likely to show poor awareness of owning the product and poor price recollection shortly after the purchase.
  • more likely to state they had not thought about buying the product in question until the day of purchase.
  • passive buyers, with less than a third enquiring about the product themselves.
  • less likely to consider whether they had other insurance products which may provide similar cover.

For these reasons, the FCA has reported that the add-on sale has a clear impact on customer behaviour and often affects their decision-making and gives the motor dealers and other distributors a point-of-sale advantage (with almost half of customers being unaware that they could have bought GAP insurance other than at the point of sale).

As a result, many customers are getting poor value for money arising from lack of transparency and comparability about the value of GAP insurance products.

The FCA’s new rules will require the seller of add-on GAP Insurance to provide:

  • prescribed information to the customers; and
  • a deferred opt-in period.

Prescribed information

In addition to ICOBS information requirements, GAP insurance distributors will be required to provide customers with the following information in a 'durable medium' and in a clear and accurate manner:

  • the total premium of the add-on GAP insurance policy, separate from other prices.
  • the significant features and benefits, significant and unusual exclusions or limitations, and cross-references to the relevant policy provisions.
  • that GAP insurance is sold by other distributors.
  • the duration of the GAP insurance policy.
  • whether the GAP insurance policy is optional.
  • when the GAP insurance contract can be concluded by the distributor, including the date on which the prescribed information was provided so that it is clear to the customer when the 'clock' has started.

Deferred opt-in

After providing the prescribed information, distributors are not permitted to contact the customer to conclude the sale of the add-on GAP insurance for two clear days (4 days).

The purpose of this mandatory deferred opt-in period is to allow customers time to consider options and shop around.

Customers who wish to purchase GAP insurance before expiry of the period have the option to either:

  • purchase a stand-alone GAP insurance policy; or
  • on the day after the day they receive the prescribed information (day 2) initiate the add-on GAP insurance sale themselves.


The FCA’s new rules are intended to enhance customer engagement and benefit customers through lower prices and increased choice from shopping around.

The rules, however, will have a significant impact on firms distributing the add-on GAP insurance and on the underwriters of the insurance. The rules are also likely to impact on firms involved in the sale of stand-alone GAP insurance, and motor insurers.

The industry needs to be ready for implementation of the rules on 1 September 2015. The FCA has made it clear that it will implement the rules in time to protect customers who are purchasing new vehicles during the September new vehicle registration period, and expects motor dealers and other distributors to have made the necessary changes to their sales practices and procedures by then.

We are experienced in assisting firms create and refine procedures to ensure that their sales practices and materials comply with regulatory requirements.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings