The Financial Conduct Authority (FCA) has recently confirmed that changes to the rules relating to the sale of Guaranteed Asset Protection (GAP) insurance will go ahead, with the revised rules coming into force on 1 September.
As a result, a deferred opt-in or pause in the sale will be introduced when consumers are offered GAP insurance as part of a motor vehicle purchase.
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GAP insurance distributors will also have to provide customers with additional information to ensure they have the opportunity to shop around for the best deal.
- So what does this mean for the motor finance industry and what must be done to ensure that a firm complies with the revised rules? Below is a non-exhaustive list of what firms distributing GAP insurance in connection with the sale of a motor vehicle (add-on GAP) will be required to do:
- Ensure that they are clear about advised and non-advised sales;
- Ensure that the customers understand the product and any jargon used;
- Make clear to customers that GAP insurance only provides cover for financial loss after any payout from the customer’s primary comprehensive insurance policy;
- Make clear to the customer how the insurer calculates the payout. This includes knowing what optional extras purchased alongside the vehicle might be excluded and how the provider interprets Glass’s Guide/CAP Black Book valuations;
- That it is made clear to customers that this is an optional purchase. GAP insurance should not be presented as a compulsory feature of a vehicle finance deal;
- That customers are given a clear outline of how to make a claim;
- That customers are not pressured into a purchase; and
- That it is made clear to customers that they have a 14-day cooling off period.
The FCA has made very clear that it expects to see better customer outcomes from more informed purchasing decisions and improved competition between add-on and stand-alone distribution channels as a result of these new measures. The finalised rules are designed to empower customers when making decisions about purchasing add-on GAP insurance, and limit the point-of-sale advantage of add-on distributors.
The onus is therefore on the motor finance industry and any firm distributing GAP insurance to be sure that your management controls and training for staff selling GAP insurance products is comprehensive enough to ensure that your customers are treated fairly.
Joshua Howells is a solicitor for national law firm Gateley Plc
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