GAP insurance, FCA report just published.

[Ginge R]

For anyone interested.

http://fca.org.uk/news/cp14-29-guaranteed-asset-pr...

[AOK]

Interesting. A long overdue shake up.

Thank you for posting

[tyrrell]

Yes about bloody time, report says you pay twice as much at the point of sale for dealer supplied gap, they then bundle the cost in with your HP payments so you pay even more !! Rip Off Britain alive and well

[HRH2009]

GAP insurance was always money for old rope! Given that most people, if buying a new car, would have comprehensive cover, what the hell were you paying for? Of course you new car has dropped several thousand when you take it out of the showroom, and this is a risk. With a total write off your own policy would cover 80+% of the value. The part made up by gap insurance would be small and quantifiable. Of course the unforeseen risks with motor insurance of public liability, personal injury etc. are already covered!

I seem to remember a new car salesman coming on quite strong when I refused to buy after I had agree a figure to change at a BMW agent. Some hefty commissions being paid I imagine!

[AOK]

HRH2009 said:

GAP insurance was always money for old rope! Given that most people, if buying a new car, would have comprehensive cover, what the hell were you paying for? Of course you new car has dropped several thousand when you take it out of the showroom, and this is a risk. With a total write off your own policy would cover 80+% of the value. The part made up by gap insurance would be small and quantifiable. Of course the unforeseen risks with motor insurance of public liability, personal injury etc. are already covered!

I seem to remember a new car salesman coming on quite strong when I refused to buy after I had agree a figure to change at a BMW agent. Some hefty commissions being paid I imagine!

80+% payout!? What are you smoking / who are you insured with please!

I'm a great believer of Gap / RTI insurance. My issue with it is how it's over priced by the motor trade / flogged to customers who sometimes don't even know they are buying it. Alternatively, they are told they are getting it "for free" even though there is a back end cost which the salesman is waging on to hit a certain sales % to unlock their commission.

I think you've got to be very naive to dismiss Gap. I have clients who buy X5's for £70k and they are paid out £40k two years later when their cars are nicked. They pay about £800pa to insure that £40k liability... Yet you're saying £3-400 (one off) to insure the remaining £30k risk is a bad idea? Just because GAP is not compulsory doesn't mean it's not as important a consideration.

Add to that the issue of negative equity scenarios where customers motor insurance payout doesn't cover their finance settlements...

Sold in the right way Gap makes sense. The problem is it often miss-sold / hard-sold.

AOK

[jimbop1]

AOK said:

80+% payout!? What are you smoking / who are you insured with please!

I'm a great believer of Gap / RTI insurance. My issue with it is how it's over priced by the motor trade / flogged to customers who sometimes don't even know they are buying it. Alternatively, they are told they are getting it "for free" even though there is a back end cost which the salesman is waging on to hit a certain sales % to unlock their commission.

I think you've got to be very naive to dismiss Gap. I have clients who buy X5's for £70k and they are paid out £40k two years later when their cars are nicked. They pay about £800pa to insure that £40k liability... Yet you're saying £3-400 (one off) to insure the remaining £30k risk is a bad idea? Just because GAP is not compulsory doesn't mean it's not as important a consideration.

Add to that the issue of negative equity scenarios where customers motor insurance payout doesn't cover their finance settlements...

Sold in the right way Gap makes sense. The problem is it often miss-sold / hard-sold.

AOK

Good post.

I was able to get my dealer to match the best price I found online too. I just hope my car gets stolen at its 3 year point

[TwigtheWonderkid]

GAP is like any other form of insurance. It makes good sense for the right people in the right circumstances, and is poor value for others. And if it does suit your circumstances, you need to shop around to get the best deal, and not be lazy and just buy it off the first person (the dealer) who offers it to you.

[Sheepshanks]

AOK said:

I think you've got to be very naive to dismiss Gap. I have clients who buy X5's for £70k and they are paid out £40k two years later when their cars are nicked.

I've always thought GAP was un-necessary and made even less sense on dearer cars than cheaper ones as they're less likely to be written off. The fact that premiums (on the open market) are so low gives you an indication of what the claims ratio is.

However I have to say that with premium SUVs being nicked so much there's much more of a case for it. Presumably the cost of GAP will start to rise to reflect that risk.

[TwigtheWonderkid]

Sheepshanks said:

I've always thought GAP was un-necessary and made even less sense on dearer cars than cheaper ones as they're less likely to be written off. The fact that premiums (on the open market) are so low gives you an indication of what the claims ratio is.

Life insurance premiums for people in their 20s are stupidly low, but it's still a necessity if you have a mortgage and a young family. Low premiums / low claim ratio does not equate to worthless cover.

[mcbook]

AOK said:

I think you've got to be very naive to dismiss Gap. I have clients who buy X5's for £70k and they are paid out £40k two years later when their cars are nicked. They pay about £800pa to insure that £40k liability... Yet you're saying £3-400 (one off) to insure the remaining £30k risk is a bad idea? Just because GAP is not compulsory doesn't mean it's not as important a consideration.

AOK

I understand that it would be good to get the extra £30k if your car was written off and then jump back into a brand new car. But that seems to me like a weird risk to be insuring - I would only expect to get the current market value of the car if it was written off. Cars depreciate so why would I expect to get the new price for my second-hand motor?That's just my way of thinking though - it is an obvious benefit if you are prepared to pay for it.

Protecting yourself from negative equity is another thing. But then again, maybe the finance is a bit of a stretch if there is a negative equity situation.

[Sheepshanks]

TwigtheWonderkid said:

Life insurance premiums for people in their 20s are stupidly low, but it's still a necessity if you have a mortgage and a young family. Low premiums / low claim ratio does not equate to worthless cover.

It might not be a necessity - it rather depends on the family's circumstances, but it generally would be wise.

It's a different scale of risk though. If you're the sort of person who can spend £70K+ in cash on a new RangeRover then it's not necessary. If you're stretched to the max on finance then it's pretty vital.

mcbook said:

I understand that it would be good to get the extra £30k if your car was written off and then jump back into a brand new car. But that seems to me like a weird risk to be insuring - I would only expect to get the current market value of the car if it was written off. Cars depreciate so why would I expect to get the new price for my second-hand motor?That's just my way of thinking though - it is an obvious benefit if you are prepared to pay for it.

I agree. Mercedes were gobsmacked I wouldn't buy their £399 policy. They wanted to know what I'd do if it was written off at 2yrs old. I said I'd buy a 2yr old replacement.