The Financial Conduct Authority took over from the Financial Services Authority and made no secret of the fact they were not going to be afraid of ruffling the feathers of the financial institutions.
The Financial Conduct Authority’s main aim is to increase security and awareness in the financial markets. Also to make sure that when a consumer buys a financial product, the product that they buy is “fit for purpose” and will do the way the consumer anticipates throughout the lifetime of the policy or service.
A review from such a prestigious organisation is good news for the world of gap insurance. The findings however made interesting reading.
The review went into depth and had input from both providers and insurance companies. In brief, the Financial Conduct Authority agreed that their concept of gap insurance was sound and offered a good level of protection.
They however felt that in many circumstances the policy holder was paying far too much for their policy and that this did not represent good value for money.
So does this mean that gap insurance is expensive?
Does this mean that gap insurance is no longer a viable option for the consumer?
Absolutely not. The Financial Conduct Authority agreed that the concept of the cover was worthwhile but found that customers were simply not being offered a fair deal.
This is because in most cases gap insurance is only offered at the point of vehicle sale. This leaves little or no opportunity for consumers to compare levels of cover and price differentials.
At the moment, the review has given guidance and a list of potential reforms. The most wide-reaching is that dealerships and garages will be actively encouraged to offer gap insurance and then recommend that potential policy holders research and compare the market.
This consequently means that garages will potentially no longer have a captive audience. This compare and research mentality will ultimately lead to gap insurance suppliers having to concentrate on policy terms as well as value for money.
We predict that this will cause a massive shift in the market with consumers being able to source ever improving policies at ever improving rates.
Competition will mean that suppliers will have to take a fresh look at policy performance and rate the premiums so. This unfortunately may mean that some suppliers withdraw or are forced from the market, however those more forward thinking and proactive organisations will thrive.
In summary, the review is good news for both consumers and the market place as whole as competition will improve both policy performance as well as value for money. It will also encourage innovation and we for one cannot wait to see the new developments as they unfold.