Insights into the additional revenue opportunity of Guaranteed Asset Protection (GAP)

Dealerships across the UK actively sell GAP insurance at the time of the initial purchase of a new vehicle however many of these customers are unaware that they can purchase GAP at a much lower premium from their insurance broker.

GAP insurance can sit alongside your clients’ main vehicle insurance to offer additional protection on their investment. This ensures that in the event of a write off, your client receives the full amount paid for their vehicle if their main insurance pay-out is less due to devaluation of the vehicle over time.

Existing clients are now providing you with new business opportunities.

If we follow the client journey, we see that the first company they contact after purchasing their new vehicle is their broker for a new quotation for their car insurance, and by doing so, opens the new opportunity to counter-offer our competitive GAP insurance against the more expensive dealership offering.

This new window of opportunity was opened by the Financial Conduct Authority (FCA) after its investigation of whether competition in the market for general insurance add-ons was effective.

As a broker, you are one of the first to know that your customer is buying a new vehicle that could need additional guaranteed asset protection.

As part of its reform of general insurance add-ons, the FCA changed their regulations for the £160m Gap insurance market in September 2015.

“While our findings applied across all general insurance markets, we had significant concerns about the impact of the add-on mechanism in the GAP insurance market. We found that:

  • Almost two-thirds of add-on customers (59%) reported not having thought about buying GAP insurance until the day they bought it.
  • Add-on GAP insurance customers had a worse understanding of the product than standalone GAP insurance purchasers.
  • Almost half of customers reported being unaware that they could have bought GAP insurance other than at the point of sale. Add-on GAP insurance customers were the least likely to shop around relative to purchasers of the other four sampled (add-on) products in the Market Study (only 19% of respondents said they did).
  • Shopping around is likely to be particularly worthwhile. Add-on GAP insurance prices can be significantly higher than stand-alone prices. Furthermore, the stand-alone share of the market is very small in comparison with add-on GAP sales, which further underlines the advantage held by add-on distributors.
  • Our evidence suggests that GAP insurance sold as an add-on is often poor value for customers, with only 10% of retail premiums for add-on GAP insurance being paid out in claims. This is a very low claims ratio relative to other products.” FCA Policy statement PS15/13

The FCA states that dealerships must follow the new rules with GAP insurance by introducing a deferred opt-in and improved information procedure. This ensures that dealerships are allowing your clients to learn more about GAP insurance and about other providers that can offer cover at a much more affordable rate.

For example:

  • Day 1: Your client purchases a new vehicle and is provided with GAP insurance information from their seller.
  • Window of Opportunity is Day 2 & 3: Your client is given breathing space to shop around with no contact from the original seller of their vehicle permitted.
  • Day 4: The GAP insurance can be purchased from the original seller of their vehicle.

Within this window of opportunity many clients will contact you to update their information of the new vehicle and will be waiting to finalise their original GAP insurance quotation however this is where you can counter-offer with Acasta’s comprehensive GAP.

After extensive research Acasta has created an all-inclusive asset protection policy.

Our car, taxi and van GAP product contains guaranteed asset protection, return to invoice, and replacement vehicle insurance to cover all eventualities in one policy whilst keeping the premium competitive. Also, our motorcycle cover includes both guaranteed asset protection and return to invoice insurance.

Simple rating matrix for a quick and easy sales process from the Acasta Broker Portal.

Acasta’s rating matrix is based on how much the vehicle is worth and how long your client would like the cover to last. This allows a quick and easy sales process with the level of indemnity being the vehicle value. All pricing and documentation is available to view online on our broker portal.

We can also provide the facility for a buy online system for your website that is completely automated to open further revenue streams for your business.

Like to know more?

Contact our underwriting team:

Mobile: 07714 237 336

Or visit our website for more information. You can also follow us on social media where we share our observations, opinions, and forward-looking thoughts on the latest developments in the insurance industry. LinkedIn Twitter


GAP Insurance (Guaranteed Asset Protection)

This is when you will receive the difference between the insurance pay-out to you and the cost of your finance settlement.

RTI Insurance (Return to Invoice)

Return to Invoice is the difference between the pay-out received and the price you paid for the original purchase price of the vehicle.

RVI Insurance (Replacement Vehicle Insurance)

Vehicle Replacement Insurance covers the difference between the pay out to you from the insurer and the cost of a like for like vehicle as it would cost in today’s market place. This is for when your original vehicle purchased has since increased in retail price.

Full policy cover information is available via our online broker portal.

Citations: | Policy Statement PS15/13, page 6, 1.11