GAP Insurance Paid Back Just 6 Percent of What Drivers Paid, FCA Figures Show

• The Financial Conduct Authority found that GAP insurance paid back only 6% of what UK drivers spent on premiums in 2022, while some firms kept up to 70% of every premium as commission.
• The regulator forced insurers to pause GAP sales in February and March 2024, and only four firms have so far been allowed to resume, with lower commission attached.
• Over 2.4 million GAP policies were in force when the FCA stepped in, meaning millions of drivers could have paid for cover that returned almost nothing.

The add-on sold at every car dealership, and the number behind it

Guaranteed Asset Protection insurance, almost always shortened to GAP insurance, is the policy a finance manager offers at the end of a car purchase to cover the gap between what a driver’s main insurer pays out after a write-off or theft and what the driver still owes on finance or originally paid for the car. It is pitched as peace of mind for a few pounds a month. The Financial Conduct Authority’s own figures suggest it has, for years, delivered almost none of that peace for the price charged.

In 2022, the regulator found, drivers received back in claims payouts just 6% of what they had collectively paid in GAP premiums that year. Put another way, for every £100 spent on the cover, £94 did not come back to customers in any form. Some of that money covered genuine claims handling and underwriting costs, but a large share went somewhere else entirely: commission.

Where the money actually went

The FCA’s review found some firms paying out “as much as 70%” of the value of GAP insurance premiums in commission to the dealers and brokers selling it. That is not a processing fee or an admin charge. It is the single largest line item in the price a driver pays, often dwarfing the cost of the insurance risk the policy is supposed to cover. A driver handed a GAP quote at a finance desk has, in effect, been shown a retail price built mostly around what the person in front of them is paid to close the sale, not around the actual chance of needing to claim.

This is the structural problem the regulator pointed to as the reason GAP stayed such poor value for so long. The dealer or broker setting the commission rate is also the one explaining the product to the customer, so there was little pressure from the sales side to keep prices down. The customer, comparing add-ons in the finance office minutes after agreeing to buy a car, was rarely in a position to shop around or negotiate the commission built into the price on the spot.

Why the FCA stopped sales altogether

The scale of the value problem pushed the FCA further than a warning letter. On 9 February 2024, the regulator announced that a number of insurers had agreed, at its request, to pause all new GAP insurance sales. On 4 March 2024 it went back to the remaining firms in the market with the same request. The effect was close to a market-wide suspension of a product that, at the time, covered more than 2.4 million policies in force across the UK, a scale few other FCA interventions have matched in the motor insurance space.

Pausing sales on this scale is one of the more aggressive tools the FCA has, short of a formal ban, and it signals how far short of fair-value rules the regulator judged the product to be falling. Firms were not simply told to adjust their pricing. They were told to stop selling until they could demonstrate the product was worth what customers were paying for it, and to resubmit their pricing models before being let back into the market at all.

Who is allowed to sell it again, and what changed

Sales have not simply resumed as before. The FCA has so far confirmed only four firms are permitted to restart: Fortegra Europe Insurance Company, Motors Insurance Company, Amtrust Europe, and Financial & Legal Insurance Company. Each had to show its GAP product provides fair value to customers before being allowed back into the market, and each has returned with substantially lower commission built into the price than before the pause. The regulator has made clear that this clearance reflects an assessment made at one point in time, not a permanent clean bill of health, and other firms’ applications to resume selling are still under review.

For drivers, the practical effect is that a GAP quote from one of these four named firms today has been through a value test that older policies never faced. A quote from any other provider, or a policy bought before February 2024, has not been through that same scrutiny, which is worth bearing in mind when a dealer presents GAP as a standard, interchangeable add-on rather than a product with a troubled recent history.

What to do if you already hold a GAP policy

Anyone who bought GAP insurance before the 2024 pause should pull out the policy document and check three things: the insurer named on it, the commission or total cost breakdown if one was provided at the point of sale, and whether the policy is still with a firm currently licensed to trade. If the insurer is not one of the four firms the FCA has cleared to sell new policies, that does not automatically void an existing policy, but it is worth contacting the Financial Ombudsman Service if a claim is later refused or undervalued, as GAP complaints are one of the areas the Ombudsman has already dealt with at volume.

Keep a copy of the original sales paperwork, including anything that shows what was said about the product at the point of sale, as this becomes the key evidence in any later mis-selling complaint. A complaint does not need to wait for a claim to fail. If the commission rate was never disclosed and turns out to have been excessive relative to the cover provided, that fact alone is enough to form the basis of a complaint to the insurer and, if unresolved, to the Financial Ombudsman Service.

What to check before buying it new

For anyone shopping for a car now, the practical lesson from the FCA’s figures is to treat a GAP quote at the finance desk the same as any other add-on. Ask for the commission or cost breakdown, get at least one comparison quote from an independent GAP provider rather than the dealership’s in-house option, and compare the premium against the realistic difference between the car’s insured value and any outstanding finance, which shrinks every month as the loan is paid down. For many drivers on a short finance term with a healthy deposit, that gap is smaller than the premium being asked to cover it, and standalone GAP policies bought independently of the dealership are frequently cheaper than the one offered at the point of sale for an identical level of cover.

How GAP insurance is supposed to work

To understand why the commission figures matter so much, it helps to see what GAP insurance is meant to solve. A new car loses value the moment it leaves the forecourt, often dropping by a fifth or more in its first year alone, while a loan or PCP agreement is repaid on a fixed schedule that does not track that fall. If the car is written off or stolen in year two, the driver’s main motor insurer pays out the car’s current market value, which can be several thousand pounds below what is still owed on finance. GAP insurance is designed to cover exactly that shortfall, leaving the driver without a car and without a lingering debt on a vehicle they no longer have.

On paper, that is a useful product for anyone who bought with a small deposit or a long finance term. The FCA’s figures suggest the problem was never the concept of GAP insurance itself, but the price UK drivers were charged for it relative to what they could expect back, and how little choice they were given over who set that price.

Buying it independently instead

GAP insurance does not have to be bought from the dealership at the point of sale, and in fact it can usually be added at any point within the first 90 to 180 days of ownership, sometimes longer, depending on the provider. A handful of specialist UK insurers sell GAP policies directly to drivers online, entirely separate from any car dealership. With no dealer commission built into the chain, these policies are frequently a fraction of the price quoted in the finance office for an equivalent level of cover. Reading the policy wording is just as important: some GAP products cover only the gap to the finance balance, while others, usually called return-to-invoice cover, pay back the original purchase price regardless of the finance outstanding, and the two are priced differently for good reason.

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Sources:

• Financial Conduct Authority: Firms recommence GAP insurance sales following FCA action