GAP insurance - the next big misselling scandal

Doc_N

Financial journalist Paul Lewis (not Martin) wrote this article recently:

https://money.radiotimes.com/news/buying-gap-insurance-read-this-first/

Some interesting extracts below - maybe time to go back to the garage that sold you your new car?

Maybe another campaign for Martin Lewis too?

"Gap insurance is meant to make up the difference to the price of a new car. However, the report reveals that the dealership that sells it to you earns massive commission. In one example it gave, a dealership charged the customer £300, plus Insurance Premium Tax of £60. The actual insurance only cost £87, including the distributor’s commission.

That left the dealership with £213 commission for itself – 71 per cent of the pre-tax cost.

The supreme Court decided in 2014 that undisclosed commissions of around 70 per cent on Payment Protection Insurance were excessive, and the FCA then ruled that undisclosed commission of more than 50 per cent constitutes mis-selling.

As yet, the FCA has not extended this to other forms of insurance, although it did recently fine Carphone Warehouse more than £29 million for mis-selling a technical support and insurance product with mobile phones.

So if you’ve bought Gap insurance at the time you were sold a car,a trip or any retail product, you should consider if it was properly sold at a fair price. If not, then complain and ask for your money back. If that fails, appeal to the Financial Ombudsman Service."

dunstonh

So if you’ve bought Gap insurance at the time you were sold a car,a trip or any retail product, you should consider if it was properly sold at a fair price. If not, then complain and ask for your money back. If that fails, appeal to the Financial Ombudsman Service."

The FOS would reject the complaint on that basis as there has been no ruling on maximum commissions on other products. So, as it stands, there is no breach of FCA rules.

it is not possible to say whether GAP would fail under section 140a of the consumer credit act as it is not quite the same thing as PPI. PPI was a bolt on to the debt. Whereas with GAP, it would need to be decided whether it is a bolt on to the debt or whether you are borrowing an amount to cover the premium. Someone would need to test it in court. problem is that it is unlikely anyone will as the premium levels are low and the excess commission over 50% is even lower. So, unless the FCA decide to apply it to other insurances, it is just a hopeful punt by people.

In the Paul Lewis example, the excess over 50% is £63. Would you risk court costs on that basis?

Doc_N

dunstonh wrote: »

In the Paul Lewis example, the excess over 50% is £63. Would you risk court costs on that basis?

Certainly not - obviously! But Paul Lewis' advice is this:

"So if you’ve bought Gap insurance at the time you were sold a car,a trip or any retail product, you should consider if it was properly sold at a fair price. If not, then complain and ask for your money back. If that fails, appeal to the Financial Ombudsman Service."


Nothing at all to be lost by taking that route (since we don't yet know how the FOS would rule) and potentially quite a lot to gain.

Bermonia

FOS’ approach is usually quite easy to gauge... if it is not currently considered wrong by the FCA or courts then they will have no option other than to reject the complaint - FOS would not want to be seen as the ones making policy, especially on an issue that could have widespread consequences.

roddydogs

Personally I think anyone who took out PPI or gap insurance via the dealer only has themselves to blame, just cant see this taking off like ppi did.

Nasqueron

This is not the next big miss-selling scandal. People buying bad value GAP rather than sorting their own policy out is just a case of caveat emptor

Doc_N

Nasqueron wrote: »

This is not the next big miss-selling scandal. People buying bad value GAP rather than sorting their own policy out is just a case of caveat emptor

We shall see, shan't we?

You could have said exactly the same thing about all the other mis-sold insurance products that people were ripped off with - and look where that led to. Huge payouts and companies saying they'd never misbehave again - until the next time of course.

dunstonh

You could have said exactly the same thing about all the other mis-sold insurance products that people were ripped off with

What other missold insurance products that people were ripped off with?

Only one type, PPI, has had such a ruling made on it and even then it only applies if s140a of the consumer credit act is activated.

Nasqueron

Doc_N wrote: »

We shall see, shan't we?

You could have said exactly the same thing about all the other mis-sold insurance products that people were ripped off with - and look where that led to. Huge payouts and companies saying they'd never misbehave again - until the next time of course.

The huge payments were due to miss-selling, not commission


The commission issue only came about for a small number of policies which were rejected AND fell in the period covered above.

[Deleted User]

Doc_N wrote: »

We shall see, shan't we?

Will we? I sincerely doubt it.

Bermonia

We already have seen, GAP insurance has been around ages... and there HAVE been complaints, albeit very few, and of those very few even less have been upheld... would take some particularly god awful paperwork from time of sale for a complaint to be even considered for an uphold.

Quite frankly there just isn’t the appetite for it given the low costs involved, usually claims management companies drive the so called scandals but they have no interest for 20% of next to nothing lol