Drivers to see car insurance premiums settle amid new rules to take ‘action’ against price hikes
The FCA stopped GAP products temporarily in March
GETTY
British motorists are set to benefit from fairer car insurance deals after poor pricing forced the UK regulator to intervene.
The Financial Conduct Authority, which is responsible for ensuring financial services behave properly in the UK, including insurers, has stepped in to ensure customers are getting the best value.
The intervention into general insurance products includes motor and Guaranteed Asset Protection (GAP), which covers the difference between what insurers pay and the actual value of the item.
The FCA recently asked GAP providers to temporarily stop selling to customers after numerous complaints about the number of payouts came to light.
Do you have a story you'd like to share? Get in touch by emailingmotoring@gbnews.uk
GAP insurance covers the difference between how much a vehicle is and what an insurer is willing to pay
PAThe regulator found that GAP insurers were charging huge amounts for premiums, as high as 70 per cent but only paid out six per cent in claims.
Matt Brewis, Director of Insurance at the FCA, said: “Insurers need to make sure their customers are getting fair value.
“Progress is being made, but we are still seeing too many examples of insurers and brokers lacking the right information, governance, or oversight to ensure their customers get consistently good outcomes.
“All insurance firms should take note of our findings and make improvements where appropriate.”
In May, the FCA permitted several insurance providers to recommence sales of GAP products following changes.
But, the regulator warned that if insurers are unable to demonstrate that their products meet FCA rules and provide fair value, it will take “appropriate regulatory action”.
The FCA stated: “All manufacturers and distributors of general insurance should assess whether and to what extent these issues apply to your activities
“If you identify shortcomings in your firm’s product governance arrangements, we expect you to act promptly to remediate them. This includes redress to customers where harm has been identified.”
An investigation by the regulator found that many manufacturers were not “adequately assessing and evidencing” that their products deliver fair value and good outcomes.
This means that many firms are not identifying any instances where their products are not delivering fair value to customers.
A GAP policy stops drivers from losing out and risking a shortfall from their insurance providers who may not be willing to cover the full costs of a new car.
The protection is an essential car insurance add-on which covers the difference between the amount the insurance provider pays for a written-off vehicle, for example, and the amount a driver needs to pay to buy a new or equivalent model.
LATEST DEVELOPMENTS:
GAP insurers only paid out 10 per cent of claims last year
PAAccording to FCA reports, last year providers only paid out 10 per cent of claims compared to 56 per cent for motor insurance.
Despite many drivers wanting this essential cover, due to insurers being reluctant to pay out, the FCA found this does not offer the best value to customers.
The watchdog said it is also considering the most “appropriate supervisory and regulatory actions we can take to address these issues as soon as possible”.
You may like
