Dealers given three months to comply with add-on GAP sales rules
The Financial Conduct Authority (FCA) is forging ahead with new rules on selling Guaranteed Asset Protection (GAP) insurance aimed at increasing competition in the market, AM Online has reported.
Despite objections received from some organisations, including the National Franchised Dealers Association, that the consultation period for the new add-on sales rules was insufficient, the FCA has given car dealers until 1 September to implement them.
After that, dealers cannot introduce and sell GAP on the same day. Instead they will have to provide customers with information to help them shop around and must give them a deferral period of four days for new and used vehicles.
The rules were released alongside the final findings of the FCA's general insurance market study on GAP sale competition.
Among other things, the report found that add-on GAP insurance customers had a worse understanding of the product than standalone GAP insurance purchasers, and that almost half of customers were unaware that they could have bought GAP insurance other than at the point of sale. In addition, add-on GAP insurance is often poor value for customers, said the study.
"We expect to see better consumer outcomes from more informed purchasing decisions and improved competition between add-on and standalone distribution channel, countering a 'point-of-sales advantage' for dealers and the lack of transparency," the FCA said.
On pushing the rules through within the three-month time frame, the organisation commented: "It is important that the remedy should apply from September, so that the increased number of customers purchasing vehicles will benefit from the remedy."
Ciaron Whelan, divisional director at The Warranty Group, said: "It is important to underline that, in our experience, the vast majority of dealers were already selling GAP in a responsible fashion, so they have little to make in the way of changes. The key adjustment is that dealers will need to ensure that they have a consumer focused solution."
He added: "The main impact will be that dealers will need to be able to provide clear retrospective evidence that they are adhering to the rules."