Regulator plans to tackle GAP insurance sector
The Financial Conduct Authority (FCA) plans to encourage more competition within the guaranteed asset protection (GAP) insurance market.
Worth around £160 million, the operators will now have to ensure they act in the interests of customers and allow people to shop around for the best deals.
The proposals follows the FCA’s recent study into general insurance add-ons and how they are sold to consumers on the shop floor.
Christopher Woolard, director of policy, risk and research at the FCA, explained: “Earlier this year we said that firms must put consumers’ interests first. It’s important that people are able to make informed decisions about whether they need GAP, and if they do, the best place to buy it.
“Proposed rules are intended to help consumers from paying too much for a product that may not be offering good value for money.”
Changes will mean that shop assistants will now have to ensure they give consumers enough time to assess whether they want to purchase the GAP product and the sale process must not be concluded immediately.
GAP distributors will also be required to ensure they provide key information that explains people can shop around and get the product from another provider.
According to the FCA, GAP add-on sales account for an estimated annual overpayment of £76 million for every £108 million paid in premiums.
The new changes are set to come into force in September 2015, following a consultation with the industry until March 13th next year.