Gap expertise in focus

Direct Gap insight for Motor Finance Magazine

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We were excited that Direct Gap managing director, James Cartwright, was  featured among other industry figures in this article on trends in GAP insurance in Motor Finance Magazine.James Cartwright gap insurance expert

The motor industry is under pressure at present, with new car sales faltering. In the current climate, dealerships have come under pressure - and the GAP insurance market has shown a decline of 8.9% in the first half of 2019 (compared to the same period last year).

Independent GAP providers - like Direct Gap - have held their own despite this - partly as they have an advantage over motor dealers in the market. Direct Gap director, James Cartwright, explains:

“The car dealer will pay insurance premium tax at a rate of 20%, mirroring VAT. Whereas for us, as an independent, the rate of insurance is actually lower at 12%. So there is an immediate cost saving for the customer of 8% on the insurance premium tax.

Another advantage is that the motor dealer offering can generally only be sold within a window of 14 days of when the customer takes delivery of the vehicle. Our products are far more flexible, with up to 180 days to offer a product to the client.”

In addition the lower overheads and smart approach of independent providers allow them to offer much more competitive prices for high quality products.

It’s not plain sailing though. As a result of headwinds, dealerships are increasing their drive to secure sales of add-on products for the cars they have sold.

Direct Gap has seen the impact of this, as James Cartwright describes.

“We’re seeing cancellations from customers whose dealers have come back to them and slashed the price of the product, or they may include it in the finance package in some way. In some cases, the dealer has refused the sale of the car unless the GAP insurance policy was also purchased.

That is a big threat. It is getting increasingly difficult for car dealers to make a profit from finance and add-on products.”

There are other trends to take into account too. The profile of claims is changing as there has been an increase in theft claims, particularly those associated with keyless entry.

With more electric vehicle sales, there’s more uncertainty about depreciation and residual values - with wide variations between brands.

The FCA is also watching the GAP insurance market closely because add-on GAP insurance sold by dealers had represented poor value and was being mis-sold. There is now a two day pause between the start of sale and finalising it to allow people to shop around at independent providers.

If you’d like to read the full article about trends in the GAP insurance market, you can find it here.


by Beate Kubitz at 1 Oct 2019, 00:00 AM