Friday, January 30, 2015
FCA announces opt-in proposal for GAP products
The Financial Conduct Authority (FCA) has issued its long awaited proposals for the future sale of GAP products by car dealers and has confirmed its intention to implement a four day deferred opt-in on all policies.
Earlier this year the regulator promised a shake-up in the way GAP is sold by limiting what it judged to be the point of sale advantage enjoyed by dealers and making it easier for consumers to shop around.
The FCA’s key proposals are:
- a deferred opt-in or pause in the sale. A salesperson can start the sales process but cannot conclude the sale for a set time period, giving customers time to consider whether they need the product at all and to shop around if they do;
- a requirement for add-on GAP distributors to provide information that will encourage consumers to shop around, including by advising them that they can purchase the product elsewhere.
The FCA said add-on GAP insurance claims ratios from 2008 to 2012 averaged 10%, with only £10 in every £100 paid in premiums being paid out in claims. It also said GAP add-on sales account for an estimated annual overpayment of £76m for every £108m paid in premiums.
“These factors indicate that people are buying products that offer poor value for money,” said the FCA.
An industry insider, close to the consultation process, said the GAP proposals are less onerous than expected for franchised dealers, although car supermarkets may find the four day deferred opt-in a challenge.
“With a four day cooling off period franchised dealers will be able to build it into their handover process as very few cars are bought and driven away on the same day. It then gives them the opportunity to once again go through the fine detail on GAP when the customer picks up their car. This, in turn, will help them prove their compliance . However, it may be an issue for some of the large car supermarkets who operate on a sell and go basis.”
The FCA is asking for feedback on its proposals by 13 March 2015 and intends to implement the new rules in September 2015.
Click here for the full FCA statement.
DATED: 30.01.15
FEED: MT
