The Financial Conduct Authority (FCA) are finally increasing the pressure on motor traders to stop them selling insurance products with unfairly hiked premiums.
Despite my reporting last summer (see earlier blog post – 24/07/2023) that the FCA’s new Consumer Duty Regulations, which came into force on 31st July 2023, should force motor traders to stop selling GAP insurance at hugely inflated margins, this didn’t have the intended effect. Dealers are still trading on car buyers’ financial insecurities to peddle these products at huge financial gain to themselves. I prevent my clients buying these products every week!
(GAP insurance is designed to fill the gap between what you paid for your car and what your insurance company will pay you for it if it is written off months or even years after you bought it. It is sometimes called ‘Back to Invoice’ insurance. This can be helpful if you are unfortunate enough to suffer a total loss and the value of your car is significantly less than you paid for it).
However, dealers are still not heeding this ‘Consumer Duty’ warning – i.e. to put consumer interests before their own – and this has now led to the FCA taking further action which may force dealers, and possibly everyone else, to stop selling GAP policies at all.
This is good news for motorists as it should hopefully stop them buying these policies from motor traders at hugely inflated premiums.
It is not such good news, however, for smaller companies who have been selling GAP policies direct to consumers at much fairer prices, e.g. gapinsurance.co.uk – I have bought two policies from them and sent several of my clients their way – as these companies may well also get unfairly caught up in the FCA’s new proposals. This would then prevent car-buyers purchasing a fairly-priced GAP policy.
Of course, it remains to be seen what effect these new FCA measures will have.
If you are buying a car from a dealer and you are offered additional products, please do seek my advice. It could well save you hundreds of pounds.