New FCA ruling will protect consumers
THE Managing Director of Earby-based West Craven Insurance Services has welcomed new proposals by the Financial Conduct Authority that aim to protect consumers purchasing Gap Insurance.
Ian Clarkson has suggested that many people were being mis-sold or vastly overcharged for GAP insurances policies that offer cover for the difference between what you owe on the vehicle and its market value.
“Gap Insurance is really important because if you have a vehicle that is written off, you’ll still be liable to satisfy your finance or lease agreement. Given that your insurance will pay out the market value of your vehicle, you’re likely to get less than you owe on your finance deal, especially when interest is taken into account,” said Mr Clarkson.
“Gap insurance covers you for that shortfall, but it should be relatively inexpensive. We’ve heard of examples where people got deals from their motor dealership without being aware that they weren’t obliged to sign up there and then. They are also often charged outrageous fees, where the dealership is taking 90 per cent commission.”
New proposals by the Financial Conduct Authority (FCA) aim to improve competition in the market and enable people to make more informed decisions.
“The new regulations will see a deferred opt-in or pause in the sale. A salesperson can start the sales process but can’t conclude the sale for a set time period, giving you time to consider whether you need the product and also the chance to shop around for deals which could deliver a massive saving,” added Mr. Clarkson.
“Add-on GAP insurance claims ratios from 2008 to 2012 averaged just 10 per cent, meaning only £10 in every £100 paid in premiums was actually paid out in claims. GAP add-on sales also account for an estimated annual overpayment of £76 million for every £108 million paid in premiums! This is why I welcome the FCA proposals – and I’d urge anybody arranging car finance to speak to a locally based broker, as you could make an incredible saving.”
The FCA has said that people are buying products that offer poor value for money and that distributors enjoy a very strong position – with little competition at the point of sale meaning that there is no pressure on sellers to reduce price. Under the new regulations, set to come into force in April, there will be a requirement for add-on GAP distributors to inform consumers that they can purchase the product elsewhere.