‘Mind the Gap’ a New Regulatory Approach

On 1st September, the way in which dealers can sell GAP and RTI add on insurance products will change. This is the outcome of changes announced by the FCA on 10th June  and dealers will need to act now to prepare for this change. Under the new requirements, dealers must ensure customers receive timely, transparent information about the products and how, subject to an assessment of each customer’s circumstances, they can benefit the car ownership experience.

1st September will see two key changes implemented:

  1. Deferred opt in
  2. Information to encourage shopping around

Deferred opt in

A four day period must elapse from the day a salesperson introduces GAP to the time at which a policy can be concluded. For new cars this may less of a change because of the inevitable time lag between sale and delivery. For used cars it clearly means that new processes will need to be developed. Clearly, dealers will need to develop follow up processes and potentially make use of funding options, such as that provided by AutoProtect.

An interesting side note to the FCA’s plans is that the customer can initiate the purchase of add-on GAP the day after being provided with the information prescribed by the FCA. For this reason, we anticipate more dealers will make information about GAP available online to help stimulate customer engagement with the product.  We can see a growing demand for tools such as online explanatory videos. Finally, it is important to recognise that it remains the customer’s prerogative to purchase GAP insurance immediately from stand-alone providers, if they wish. This makes the quality of dealer presentation, mapping out the showroom USPs and online support information even more important.

Information to encourage shopping around

From 1st September, dealers will need to provide customers with the total add-on GAP premium, separate to any other item. In addition, they must make customers aware of their rights and provide key information in writing (not by reference to a website). This will include:

  1. Details on the product; features and benefits, significant and unusual exclusions or limitations. They should reference any specifics to the policy document.
  2. Advice that customers can purchase GAP from other sources.
  3. Details on the duration of the policy.
  4. Details on whether the product is optional or not.
  5. A clear date on which the information has been provided (to start the four day clock).

At first sight these may seem onerous, but they do reflect a wider trend towards transparency across all financial services and dealers need to embrace this change. At dealer level, we do not see a one size fits all approach working; rather we are working one to one with dealers to review their processes and controls and initiate the changes required to deliver the new standards.

GAP & RTI can remain important income opportunities. By capturing the ‘treating customers fairly’ ethos, we can foresee dealers increasing their sales penetration, simply because customers can make a more conscious buying decision. To realise the change as an opportunity, dealers must move swiftly, bring in the right level of expert support and devise the type of customer-led experience that will be good for the sale of GAP/RTI products and the wider dealer brand reputation as well.