Changes to rules governing the sale of GAP insurance introduced on September 1 have already influenced consumer behaviour.
The amendments were designed to offer consumers more protection and, primarily, additional time to shop around for the best deal.
Consumers are already “flocking” to third-party providers for cheaper equivalent policies, said Warranty Direct, which has recorded a 213% sales increase in the first two weeks of September compared to the same period in 2014.
Online quotations have increased by 70% in the same period.
David Gerrans, Warranty Direct managing director, said: “There’s no doubting the rule changes are already having an impact. There’s strong demand for GAP products and consumers are now empowered sufficiently to go out and do their own research.
“While the overall size of the market is likely to shrink, this is only because consumers will ultimately be paying less for the same level of cover. The market will feel much more balanced towards consumers when dealers and third party providers account for roughly 50% of the market each.”
The Financial Conduct Authority (FCA) introduced the new rules after concerns about the ‘add-on’ price of GAP insurance and the dominance of the market by manufacturers and dealers.
Dealerships – accounting for 97%* of the market – must now provide the GAP insurance cost separately from other prices when buying a car, and allow four days between providing policy information and making the sale.
The total value of the GAP insurance market in 2014 was estimated to be £244.8 million**, up from GBP 186.9 million in 2010.
GAP insurance attributable to new cars is £134.1m as opposed to £110.7m for used cars.
*Finaccord Market Report: UK GAP Insurance, 2014
** Finaccord Market Report: UK GAP Insurance, 2014