Drivers get new car insurance rules with policy ‘ban’ lifted

Drivers have been handed a major car insurance update amid significant concerns about policy misuse. The Financial Conduct Authority announced that insurers who had previously agreed to stop selling Guaranteed Asset Protection (GAP) could restart.

The regulator said firms it had given a green light to included Fortegra Europe Insurance Company, Motors Insurance Company, Amtrust Europe and Financial and Legal Insurance Company. The FCA said that they had resumed “with materially lower levels of commission being paid out to those selling Gap, improving value for customers”.

Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, said: “I’m pleased that, following constructive engagement with industry, a significant proportion of the market is now able to restart sales.

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“GAP insurance can provide a useful service to customers, and we continue to work with the rest of the market to address our concerns.” The announcement came after the regulator said in February 2024 that 80% of the Gap market would be suspending sales after feeling that it was failing to provide fair value to some consumers.

GAP insurance provides cover for any financial shortfalls that occur should a vehicle be written off or stolen. A shortfall can occur if a Motor Insurance payout does not return the original purchase value of the vehicle, or if the vehicle owner still has outstanding finance to repay.

At the time of the ban, an FCA spokesperson told Car Dealer today: ‘We have provided firms in our second stage of engagement, for Gap sales via online distribution channels, a temporary extension on our request to pause sales until 30 April 2024.

‘This is so that customers are still able to purchase Gap Insurance directly while we review responses from firms. The pause in sales agreed with the largest Gap providers, announced in February, remains in effect.’