News

OnClaims helps Brokers fill the GAP in the market

The FCA’s first white paper into the sale of add ons wasn’t a great read for brokers and wholesalers alike. Their initial findings made reference to poor claims ratios and directly linked this to an assumption that add on products were of poor value to the purchaser.

This led to a number of respondents raising objections in principle to using the claims ratio to shine a light on poor value and also raised a number of practical concerns with the proposal. For the measurement of product value, firms questioned the inclusion of Insurance premium tax in the claims ratio calculations, arguing that IPT should be excluded because it is not part of the income earned by firms. This was raised specifically in respect of GAP where respondents highlighted that add-on GAP sold face to face through dealers included IPT at 20%, whereas GAP policies sold by brokers only incurred IPT of 6%.

Although we still await the FCA’s final decisions which are due in early 2015, there is no doubt that the way GAP insurance is sold is likely to change. For example, forbidding car dealers to sell GAP until 7 days following the sale of the vehicle. This would provide consumers with the breathing space required to make an informed decision regarding the value of the product, rather than feeling herded into a ‘no choice’ decision.

This will open the market up to brokers, who know their clients and can offer the product based on a genuine need and at a more competitive price.

Do you want to be ready for the change? OnClaims offers two products, GAP Valuation and GAP Finance. To find out more about these products and to widen your portfolio, visit the Products section of our website.

September 20, 2014 in: News
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