Guaranteed Asset Protection – need to know

The Financial Conduct Authority (formerly FSA) has just begun a study into general insurance add-on products with an appeal for evidence of competition in the marketplace. The company will assess whether prices are excessive for a given quality, whether the quality is what consumers reasonably expect, any profitability differentiation between add-on and standalone sales for underwriters and distributors, and whether consumers are actively considering using alternative providers. Guaranteed Asset Protection is one of the first products coming under scrutiny.

The inquest will consider evidence from both companies and individuals, and look at the nature of competition in these markets, in particular whether these products represent good value for money and whether consumers understand what they are getting with their policy. In the past, GAP products were made extremely complicated, which meant that many dealership staff didn’t fully understand what was on offer so customers were often mis-sold. Huge mark-ups were also commonplace, which made it difficult for customers to justify the expense.

Last year we decided to streamline our GAP products and make them easily understandable and fairly priced, in line with the FCA’s Treating Customers Fairly principles. We also made several product improvements, and introduced a range of pay-monthly cover for used cars and motorhomes to provide a claim limit of £10,000 (adequate for the majority of mainstream used family cars) starting from as little as £9 per month RRP.

Every year in the UK over 500,000 cars are declared a Total Loss through accident damage, fire or theft, and those drivers will receive an insurance settlement for the current market value of the vehicle at that time – which will be much less than they paid originally. Our Guaranteed Asset Protection policy will cover the financial shortfall between the original purchase price and the motor insurance settlement, meaning that in total your customers will receive exactly what they paid in the first place.

Having invested into extensive dealer training, WMS has been able to increase our market penetration from less than 10% to almost 60% during an eighteen month period. To help dealers maximise sales, we also provide several point-of-sale materials including flyers, posters and DVD’s which convey the benefits to the customer, and all dealers are required to complete a brief annual online compliance training session as required by the FCA, to ensure that they fully understand the products and remain compliant. Due to these factors, most dealers offering our GAP cover have seen penetrations escalate to between 60-80%, and our aftersales team have been able to canvass any customers that haven’t purchased at the time. As such, we have seen very few end-users turning to the internet to purchase GAP.

EXAMPLE:

A customer buys a four year old car from you at the advertised cost of £5,000. Eighteen months later, that car is declared a Total Loss and the insurance company make an offer for the vehicle – but it is for the current market value, which is £3,000. Guaranteed Asset Protection will pay the £2,000 shortfall, taking the amount to the purchase price of £5,000.

Key benefits of our Guaranteed Asset Protection:

  • Cover lasts for up to three years (or up to five if a finance agreement was taken out)
  • Available as pay monthly and straight payment.
  • One claim limit which is for up to a maximum of £10,000.
  • No excess contributions if your customers make a claim.

For more information please request your complimentary dealer pack by clicking Here.