Hugh Savill, director of regulation, said: “This is a surprisingly generic study into general insurance add-on markets, which offer different products to meet differing needs, through different distribution chains.

“Distinct markets call for bespoke regulatory approaches, not a ‘one size fits all’ approach covering everything from GAP insurance to travel insurance. We hope and expect that the FCA will take a more market-specific approach to this as their work on this develops.”

Savill said the emphasis on claims ratios was “unhelpful” as he believes they are not an accurate benchmark of customer value: “We believe claims frequency and handling provides a more relevant measure of value.”

The FCA’s report stated the weighted annual claims frequency of add-on GAP cover was 0.3% for the period 2008-2012.   

“One of the key reasons customers purchase insurance is the peace of mind it provides,”  said Savill. “We would urge the FCA to take these factors more seriously in its further work.”

Dealers will find it difficult to prepare for changes at this stage before the FCA publishes its findings, with the only indication that it will be before the end of this year.

However, the FCA has said its remedies for GAP insurance will be introduced on an “accelerated timetable”.

♦  Dealers have until April 8 to send feedback on the GAP proposals.