global insurance management

Review procedures connected to the sale of GAP insurance as an optional extra

Oct 10 2010

Review procedures connected to the sale of GAP insurance as an optional extra

In a recent publication aimed at motor dealers, the FSA has brought GAP insurance into its sights under the Treating Customers Fairly banner. It acknowledges that the market for GAP appears to be growing and as a result it requires firms to make sure it has everything in place to prevent problems for consumers.

It is probably another indication of how the FSA wants to become more intrusive in the run up to being replaced by the regulatory body where the clue is in the title – Consumer Protection and Markets Authority.
Anyway, if a firm or its representatives are involved in the selling of GAP, the FSA is targeting the firm’s management to ensure that:

• they are clear about whether the sales are advised or non-advised;
• customers understand the GAP product and any jargon used;
• it is made clear to customers that GAP insurance only provides cover for financial loss after any payout from the customer’s primary comprehensive insurance policy;
• it is made 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 valuations;
• customers are made clear that this is an optional purchase. GAP should not presented as a compulsory feature of a vehicle finance deal;
• customers are given a clear outline of how to make a claim;
• customers are not pressured into a purchase; and
• it is made clear to customers they have a 14-day cooling off period.

Having identified problems with sales of payment protection insurance, it is possible that the FSA could undertake one of their “thematic” investigations, either just for GAP insurance or the whole area of “Optional Extras”. After all, it has been over 4 years since issued a reminder by way of their factsheet.

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