Majority of dealers not offering GAP insurance following FCA probe

The vast majority (90%) of UK dealerships are not offering GAP insurance following an investigation into the product by the FCA (Financial Conduct Authority).

Intelligent Motoring, the automotive product add-on specialist, said its own research estimates that only one in 10 dealers are currently offering GAP.

The FCA reviewed GAP in 2024 to make sure the product was representing fair value for customers.

Historically GAP insurance, also known as return-to-invoice (RTI) insurance, had been a high margin add-on product for motor retailers at the point of sale.

The FCA noted back in May 2024 that GAP products are now being sold at ‘materially lower levels of commission being paid out to those selling GAP, improving value for customers’, adding that customers would also receive better outcomes.

Duncan McClure Fisher, Intelligent Motoring chief executive, said many retailers still appear to be hesitant to sell GAP.

He said: “With vehicle values normalising after COVID, and electric vehicle residuals declining, claim payouts are regularly exceeding £20,000 to £30,000, demonstrating the critical protection GAP Insurance cover provides.

“Many retailers appear hesitant to sell the product, with only around one in ten advertising it to customers.

“This may be due to increased net rates and capped retail premiums, but flexible solutions are available to ensure dealers can offer fair value products that protect consumers, foster invaluable customer loyalty and provide an all-important revenue boost.”

McClure Fisher said FCA scrutiny has driven positive changes and brought about enhanced transparency and value for consumers.

In turn, Intelligent Motoring is reporting increasing demand and consumer appetite from its retail partners for GAP insurance through its direct-to-consumer car ownership solution, MotorEasy.

McClure Fisher continued: “During the investigation, while GAP Insurance sales were paused, the motor retail industry demonstrated its impressive ability to adapt and thrive.”

Some dealers offered alternative value-added propositions such as cosmetic, tyre and battery insurance or insured breakdown recovery.

He added: “This incredible agility demonstrates that GAP can be effectively reintroduced by retailers to rebuild revenue.

“Careful pricing, effective compliance measures, and efficient integration into the sales process, means that they can confidently and successfully offer a GAP programme.”