In 2014 the FCA published their final findings report following a thematic review of the General Insurance Add-ons market. The FCA were concerned about the lack of competition in the GAP insurance market which their research suggested:
- led to inflated prices at the point of sale;
- consumers were not always well informed about the GAP policies they were purchasing;
- consumers were often not getting value for money.
On 1st September 2015 the FCA introduced new rules (which form chapter 6 under ICOBS) aimed at addressing these concerns by installing a process outlining how GAP insurance had to be sold. The rules fall under two distinct remedies:
1) Prescribed information
Before a GAP contract is concluded, a firm must draw to the customer's attention the following information:
- the total premium of the GAP contract, separate from any other prices;
- the significant benefits and unusual exclusions or limitations, and cross-reference to the relevant policy document provisions;
- the fact that GAP contracts are sold by other distributors (whether or not the GAP contract is sold in connection with vehicle finance);
- the duration of the policy;
- whether the GAP contract is optional or compulsory;
- when the GAP contract can be concluded by the firm;
- the date the above information has been provided to the customer.
2) Deferred opt-in
The new rules also state that a GAP contract cannot be concluded by a firm with a customer until at least 2 clear days have passed since the prescribed information has been given to the customer, unless the customer initiates contact earlier (see below). An example of the timings are provided below:
- Day One: Prescribed information is provided to the customer
- Day Two: First clear day
- Day Three: Second clear day
- Day Four: GAP contract can be concluded with the customer