The future of GAP insurance
Rob Dyer, Mapfre Abraxas marketing manager
Dealers ought to consider their own GAP retail pricing strategy to ensure they remain competitive against the wider market.
Rob Dyer, of GAP provider Mapfre Abraxas, said dealers could review their insurance distribution costs, such as training, salaries, overheads and compliance. That can then guide the dealer on what is the right profitability and pricing strategy.
His advice was aimed at preparing dealers for the outcome of the FCA’s study into general insurance add-ons, including GAP insurance. Although the FCA’s final plans for the market are not yet determined, it has proposed measures that could impact on any car dealer’s ability to sell GAP.
However, Dyer said that, in meetings with the FCA, Mapfre Abraxas has challenged its concerns about dealers’ sale of GAP insurance add-ons. The FCA considers dealers have a point-of-sale advantage with GAP sales. Mapfre has countered that good penetration for GAP is 40%, and the average is between 20-40%. Had penetration been at 90% there would be a good case for a point-of-sale advantage, Dyer said.
Mapfre said encouraging customers to shop around online, another FCA proposal, means them going from an advised sales channel to a non-advised one. The FCA is considering requiring a deferred sale to counter any point-of-sale advantage. Dyer said there is already a mandatory 14-day cooling off period in any case.
Dealers should remember the positives of GAP – that it is a product that meets a genuine need. Dyer said the Financial Ombudsman Service received only 247 complaints regarding GAP in the past year. “The FCA acknowledges that GAP provides a valuable protection.”
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