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How dealers can increase profits from their used car operations

GAP under the FCA microscope

The Financial Conduct Authority is putting sales of GAP (guaranteed asset protection) insurance under the microscope. While it is not testing for mis-selling or misconduct as it did with PPI insurance, it is examining the effectiveness of competition in the sector, said Adrian Foster, director, Remit Showroom.


That means the FCA is looking at whether GAP cover is priced competitively and of expected quality and whether the consumer would benefit from standalone sales.

“We need to be on our guard,” said Foster.

He believes that GAP price and margin will be the FCA’s concerns, given that in a worst case scenario there can be eight parties each profiting from a single GAP insurance sale. Potential outcomes could include a requirement to disclose the commission to be earned to the customer, or making sure the customer is aware they can buy GAP elsewhere.

His advice to dealers was to employ professional business managers able to sell on an advised basis, to examine whether profit margins were reasonable, and to diversify into other insurance products to lessen the burden on GAP.

Next page: Financial Conduct Authority regulations

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