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GAP pricing transparency needed from FCA

GAP pricing transparency would be the biggest single advantage that the FCA could provide to help new and used car customers make more informed choices.

The Warranty Group divisional director Ciaron Whelan (pictured) says that instead of the price being revealed to the customer only at the point of purchase, it should be made freely available in all marketing material, especially the dealer’s or distributor’s website.

Whelan said: “The FCA’s approach is based on the notion that competition will increase by restricting the sale of a policy at the point that a customer chooses to purchase a vehicle, but there is no evidence to support this argument.

“Our belief is that the single biggest thing that could be done to help customers is to stipulate a completely transparent approach to pricing.

"The GAP price should be added to all dealer marketing material so that customers can have access to the price even before they walk into a showroom. Also, they should be reminded that competing GAP products are available elsewhere.

“The best way to ensure that customers make an informed decision is to ensure that they know exactly what they are buying and exactly how much they are paying for it.”

Whelan added that the FCA proposals, in their current form, may result in some dealers deciding to move out of the sector altogether.

“Post-FCA, the vast majority of dealers – those who offer a market competitive GAP product in professional manner – will continue to sell policies in similar quantities as previously, we believe.

“These dealers know that to achieve success, as with any insurance or warranty product, a structured approach is essential. It is a question of ensuring that GAP is introduced into the sales process at an appropriate time and is properly explained to the customer by a sales person who has been specifically trained to do so.

"In addition, there should be a fast, easy and effective administration process surrounding the policy,” said Whelan.

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  • Peter McKenna, Managing Director, AMS Group - 04/11/2014 17:43

    I don't disagree with Ciaron Whelan. Dealer pricing for GAP should be more transparent, but even more important, so should the cover! Not all GAP is the same; many GAP providers (particularly on-line brokers) only offer limited cover Market Value GAP, which will only pay the customer the much smaller difference between the car’s purchase cost and the Market Value as given by Glass’s Guide Retail at time of write-off. The problem here is that motor insurers rarely if ever pay-out Glass’s Guide Retail and the customer will be at the very least, disappointed by receiving, the GAP claim settlement anticipated. Worse, they could owe more on their outstanding finance. The same is true of Insured Value GAP, which will only pay the difference between the customers’ purchase cost and the Insured Value stated on their motor policy. Again, motor insures do not payout the Insured Value (nor are they obliged to unless a classic car policy) as this is the value the customer stated the car was when taking out the motor policy, usually the purchase price not its’ value at time of write-off. Those dealers (and brokers) who continue to sell Market/Insured Value GAP will undoubtedly increase their exposure to mis-selling complaints. Even under current FCA GAP Regulations they are require to inform the customer up-front how a claim will be calculated using Glass’s Guide, i.e. Market Value (see ). I am very certain that the FCA will also look very closely at GAP cover (which we welcome), ‘ensuring ‘it’s not given in the big print but taken away in the small’. AMS have been providing AMS Asset Secure® Full-cover GAP since 1992, with no Market/Insured Value or other similar claim reduction clauses; we pay the actual difference between the customer’s actual motor insurance settlement and the net invoiced purchase price. What’s more, Asset Secure® does not cost more…guaranteed.

    • max - 07/11/2014 16:00

      @Peter McKenna, Managing Director, AMS Group - Mr Whelan, knows not only the market but the Regulator, and promotes a sensible and workable agenda for all, including most of all, customers. There are many ‘’GAP’’ products, with differing cover and methods of calculations. Both the industry and insurers know what the products designed to do! ‘Short changing’ customers at claims stage on technicalities is often a result of poor short term claims practices. Get account management and product design right, robust training and competence programmes sorted, and sell it straight, and this need not be issue. Dealers need to think at point of sale, is this the right product for the right customer? It’s no good ‘hiding’ a chunk of negative equity into a deal, selling a ‘gap’, and hearing that the claims dept have a problem with the calculation – they can’t insure thin air. Well designed products, well sold and at the right price ( = in my opinion, less commission for dealers)– which was Mr Whelans’ point I believe, is the answer if this is product is to remain dealer sold.