FCA publishes evaluation of Guaranteed Asset Protection intervention

The Financial Conduct Authority (the FCA) said, as part of its 2018/2019 Business Plan, it wished to investigate the effectiveness and impact of its interventions into certain markets and industries. The FCA intends to conduct three pilot evaluations, the first being an evaluation of the FCA's September 2015 intervention into GAP insurance.

The FCA has now published its first Evaluation Paper 18/1 (EP18/1) setting out its findings.

Read our summary of the key points to note.


In July 2014, the FCA published a report setting out its findings on the general insurance add-on products market study. The FCA had three main concerns about add-on GAP insurance:

  1. Consumers were often buying GAP insurance without being aware they could buy GAP insurance separately (known as 'stand-alone insurance') and were therefore not always getting the best deal.

  2. There was little pressure on firms to offer good value because (i) add-on providers have a clear point of sale advantage and (ii) add-on buyers often have insufficient information available about the quality and prices of add-ons (or if they do, it is provided late).

  3. The consumers’ focus is on the main product (in this case, the vehicle) which led to many buying add-on GAP insurance when they may not have wanted and/or needed it.

The FCA estimated that consumers overpaid for these add-ons by between £76m to £121m (and the add-on market size was nearly £152m). In 2015, the FCA therefore intervened and implemented the following measures from 1 September 2015:

  1. Making it mandatory for add-on providers to provide sufficient information to consumers about the GAP insurance price, utility and alternate stand-alone suppliers; and

  2. Implementing a pause in the sale of the GAP insurance ('deferred opt-in') of 2 days, meaning the GAP insurance sale cannot be concluded until this time limit has passed. 

The evaluation findings

The FCA has evaluated the impact of its intervention and published EP 18/1. While the intervention had a positive impact on the market, the FCA found its impact was less than expected. In particular:

  • Add-on sales were 16% to 23% lower (rather than an expected 32.5% lower).
  • The sales of GAP insurance sold separately from a supplier other than the point-of-sale supplier increased by 6 to 8% (rather than the expected 40%).
  • Add-on prices were in general 2% to 3% lower than before the intervention (but they were expected to decrease by 17%).
  • Consumer awareness of stand-alone GAP insurance increased substantially; the proportion of consumers who shopped around more than doubled from 17% to 45%.


The FCA believes its intervention has had a positive impact with benefits to consumers of between £26m to £28m a year.  The FCA's findings also show a consumer's awareness is considerably greater.  These findings, particularly while the FCA continues to focus on the motor finance market, are positive.  It remains to be seen whether the FCA will intervene further.  It could be argued further intervention is necessary to achieve the changes the FCA wanted to see.  Or it may simply be consumers are happy with the current position and do not wish to buy GAP insurance from someone they do not know.  In those circumstances, further intervention would be both unnecessary and undesirable in an already highly regulated environment.

For further information please contact Russell Kelsall (Partner), Alanna Tregear (Associate) or Andre Lopes (Legal Assistant).

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Date published

09 August 2018


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