So what is new with Gap Insurance in 2016?

The Gap Insurance market has come a long way in the last few years. A decade ago it would have been extremely difficult for a consumer to buy Gap Insurance from anywhere but a motor dealer, of course, these days the independent marketplace is growing stronger and stronger. So what has changed, and in particular in 2016?

Let's look at some of the recent changes, and how they may affect how the Gap Insurance market now works.

1 - The new FCA rules came into effect from 1st September 2015. The long awaited FCA report on the sale of 'add-on' products by motor easy gapdealers was hoped to bring a new step change to the market. The FCA implemented new rules that were designed to improve competition in the market, by releasing the 'point of sale' advantage enjoyed by motor dealers selling the product.

Rules such as a period of time in which the consumer must be allowed to consider other options in the market, and indeed to be provided with information that Gap Insurance can be purchased from third parties, were hoped to provide consumers with the opportunity to consider all options, and hopefully get better value should they find it outside the showrooms.

Has it worked?

Well, in our view, yes and no. The feedback that we get at Easy Gap from consumers is that many are not told that they can buy Gap Insurance elsewhere by motor dealers. Many are also only asked about Gap Insurance when they pick the car up and asked if they want to buy Gap Insurance there and then. It is apparent that some motor dealers may be ignoring the rules, or implementing them in a poor manner.

However, what is clear is that the ingrained behaviour of the 21st-century consumer is that if they are not sure about something then they will simply 'Google' it. Along with the customers who are being told the new rules correctly by motor dealers, we have seen a steady increase in our independent brands.

2 - Consumers are getting better value and better products
. The very nature of a competitive market can drive both products to be improved and also provide better value in the guise of lower premiums.

Despite the fact that the rate of Insurance Premium Tax was increased on standalone general insurance products from 6% to 9.5% late in 2015 (another 0.5% from 1st October 2016) if anything we have seen the typical Gap Insurance premiums fall. The rate of IPT on motor dealer products has remained at 20%, but as the market has become more open, the motor dealers have been forced to look at their prices compared to independent providers.

The other effect of opening the market up to competition is that the features on motor dealer products now have to move towards the features offered in the open market. For example, the typical Motor dealer Gap Insurance product used to be for a set 3 years, often with no option to transfer or cancel with a refund. As features such as these are commonplace in the open market, as well as the option for up to 5-year cover, we have seen motor dealer products now becoming more flexible to be competitive.

3 - Gap Insurance is featured more by well-known consumer groups and sources. The Which? Report on Gap Insurance has been around for a number of years, but is often sourced by members of Which? who are trying to find out more about the product. In the last year, the MoneySavingExpert website has also launched a guide that features independent brands such as

4 - More people are getting Gap Insurance? There are no figures to necessarily back  up this claim totally, but the sales at independent brands like Easy Gap have never been higher. There have been several reports that motor dealers have also seen a higher uptake on Gap cover.

Perhaps the greater exposure in the UK press and the publicity on the new FCA rules have brought Gap Insurance into sharper focus, but there is little doubt that interest is growing.

5 - More insurers are entering the independent field. The traditional insurers who have only previously supplied the motor dealer Gap Insurance market are now branching out into the independent market.  As any market matures the insurers naturally garner interest in the larger volume providers.

There has always been a balance between branching into any new online market, especially when the traditional source of business like motor dealers are concerned. However, as the balance tips between sales from motor dealers and those online, the promise of high volume sales will be attractive to any insurer.

What can we look forward to for the rest of 2016 and 2017?

Well the one thing we can promise is that all Gap Insurance products bought independently will be subject to a rise on IPT of 0.5% later this year. How will this change the prices of online Gap? Not by much clearly, but you may see the increase passed on where margins are tight.

The features of Gap Insurance will no doubt evolve in the same way they have in the last few years. The beauty of this is that policies generally just get better and better.

As for us in particular at Easy Gap, well we are working on something that we cannot be too open about at the moment. All we can say is that if we can deliver what we hope then it will possibly be the biggest change to the independent Gap Insurance market ever in our view.

Exciting times ahead.

Easy Gap Insurance