Are you paying for Gap car insurance you don’t need? The FCA will investigate whether the deals are worth it
- Gap insurance covers the depreciation of your car if it is written off or stolen
- But settlements are almost never claimed, with commission levels as high as 70%.
- Now the regulator is investigating the market to see if Gap’s deals are worth it.
Motorists with Gap insurance claim only once every 300 years, and now the financial regulator is stepping in to ensure consumers are not ripped off.
The Financial Conduct Authority (FCA) is not only concerned that Gap policies are rarely being claimed, it is now raising serious questions about fees of up to 70 per cent that increase premiums, for no apparent reason.
GAP stands for Guaranteed Asset Protection and is a type of insurance that covers the loss of value of your car in the event of its loss or theft, as vehicles depreciate very quickly.
It is typically sold as a stand-alone policy or as an add-on to other types of financial arrangements, such as car insurance.
Wheeler Dealership: Many Gap insurance policies are sold at car dealerships along with vehicles.
567,895 complementary Gap policies and 1.8 million independent agreements were sold in 2022, a total of 2.4 million, which means that one in 16 drivers has a product of this type.
The average Gap premium is around £126 a year for stand-alone cover and £131 as an add-on.
But there’s a problem with Gap insurance: most motorists never claim it.
New figures from the FCA show that just 0.34 per cent of the Extra Gap is claimed each year, meaning the typical driver claims once every 294 years.
In the case of independent Gap, 1.8 percent of people who take out the policy file a claim each year, meaning the average customer files a claim every 55 years on average.
The FCA says Gap insurers pay the least on claims of any area of insurance as a proportion of the premiums they charge.
Gap’s standalone policies pay just 6.87 percent of premiums each year as claims, while Gap’s add-on offerings pay 4.37 percent.
In comparison, automobile insurers pay 64.51 percent of premiums for claims and motorcycle insurers 60.67 percent.
Now, as This is Money revealed in January, the FCA is turning its attention to low-value insurance deals.

Leverage: Most Gap insurance is sold separately, but about one in three offerings are purchased as an add-on to other insurance policies.
The FCA has given Gap insurers a month to explain why their offers are suitable for drivers.
FCA insurance director Matt Brewis said: “Customers should be reassured that we are on their side and are taking action when we see poor value being provided.”
“If companies cannot demonstrate that they are offering fair value to their customers, they should expect further action from the regulator.”
This is Money understands that the short notice of one month reflects how concerned the FCA is about the state of Gap insurance.
Some of the largest insurers issuing Gap policies are AmTrust Europe and Ageas.
The regulator is also concerned about the level of commission charged for Gap insurance; For example, insurers routinely pay car dealers to sell Gap to customers and then pay them a fee.
The FCA has examples of companies paying up to 70 per cent of the value of insurance premiums in commission to companies such as car dealers.
A spokesman for trade body the Association of British Insurers said: ‘Our members fully understand the importance of offering fair value to customers and work hard to deliver it.
“We will discuss the FCA’s concerns with them to understand where further action could be taken.”
Why don’t drivers claim Gap insurance?
Some may not even know they have the policy.
When this insurance is sold, especially as an add-on to a larger primary policy, customers often don’t realize, or forget, that they have any coverage at all.
When Gap insurance is claimed, it is almost always paid, suggesting that many customers don’t know they are covered in the first place.
In fact, independent Gap insurance has the highest payout rate of all insurance, at 99.3 per cent, with an average claim of £529.86, when customers actually make a claim.
That drops to 95.59 per cent for the Gap add-on, with a typical claim of £2,201.
How do I know if I have Gap insurance?
You should check the terms of your car insurance contract, as well as any car financing documents you have.
Gap insurance is not the only insurance arrangement on the FCA’s watch list.
The regulator said: “While this action affects Gap Insurance, many of the concerns we see are potentially related to wider issues, so company boards should take note of this action and ensure they comply with their product governance requirements across all retail products.” .’