Changes to GAP influencing behaviour
Changes to rules governing the sale of GAP insurance introduced on September 1st have already influenced consumer behaviour, says Warranty Direct.
The amendments were designed to offer consumers more protection and, primarily, additional time to shop around for the best deal.
Dealerships – accounting for 97% of the market – must now provide the GAP insurance cost separately from other prices when buying a car, and allow four days between providing policy information and making the sale.
Consumers are already flocking to third-party providers for cheaper equivalent policies, with Warranty Direct recording a 213% sales increase in the first two weeks of September compared to the same period in 2014. Online quotations have increased by 70% in the same period.
The new rules aim to help consumers save hundreds of pounds. For instance, premiums start from £135 for three-year cover through Warranty Direct compared to a typical starting price of £298 via dealerships.
GAP insurance is designed to cover the ‘gap’ when a vehicle is written-off or stolen and the insurance does not amount to the full cost of replacing the vehicle or outstanding finance owed. Nearly 70 per cent of new cars in the UK are bought on financing, making GAP insurance very attractive.
The Financial Conduct Authority (FCA) introduced the new rules after concerns about the ‘add-on’ price of GAP insurance and the dominance of the market by manufacturers and dealers.
The total value of the GAP insurance market in 2014 was estimated to be £244.8 million, up from £186.9 million in 2010. GAP insurance attributable to new cars is £134.1 as opposed to £110.7 million for used cars.
David Gerrans, Warranty Direct managing director said, ‘There’s no doubting the rule changes are already having an impact – there’s strong demand for GAP products and consumers are now empowered sufficiently to go out and do their own research.’
‘While the overall size of the market is likely to shrink, this is only because consumers will ultimately be paying less for the same level of cover. The market will feel much more balanced towards consumers when dealers and third party providers account for roughly 50% of the market each.’
