We hear from people who say their Guaranteed Asset Protection (GAP) insurance hasn’t protected them as they’d expected. Some people feel they shouldn’t have been sold it at all, or are unhappy with how long it’s taking to get the money they’re owed.
When we consider these complaints we’ll look at all the facts to decide what’s fair and reasonable in each case.
What is GAP insurance?
If your vehicle is written off or stolen, Guaranteed Asset Protection (GAP) insurance will cover the difference between the vehicle’s market value (which is what the motor insurer will base its claim settlement on) and an agreed amount. For example, the amount you have left to pay on a car loan.
GAP insurance policies are separate to car or motor insurance policies, and are sold by either car dealers or lenders.
There are three main types of GAP insurance:
- Finance GAP – The GAP insurer pays your finance provider the difference between the amount your motor insurer paid out, and the amount left on your car loan
- Return to invoice GAP – the GAP insurer pays you the difference between what your motor insurer paid out, and the amount you paid for the vehicle
- New car GAP Insurance – the GAP insurer pays you the difference between what your motor insurer paid out, and the price of a new car of the same model and specification
Types of complaints we see
People often bring their complaint to us after their insurance company has rejected their claim. You might complain about GAP insurance because:
- the payment you’ve received doesn’t cover the difference it needs to
- your claim has been rejected
- there’s been a delay in receiving a payout
- you think the policy was mis-sold
- you cancelled the policy, but didn’t receive a refund on your premium
What we look at
A lot of complaints we see about GAP insurance involve policies sold by car dealerships alongside cars bought on finance. We’ll ask questions about how the policy was sold and decide whether you were given clear information about how it worked.
Read more about what we look at for specific complaints:
If your claim has been rejected
Insurers might reject a claim because:
- the claim was for a vehicle you don’t own
- the claim was fraudulent
- the vehicle’s been used for racing
- you were offered a new replacement vehicle under your motor insurance policy, but you turned it down
- you don’t have ‘comprehensive’ motor insurance
We wouldn’t always agree for a GAP insurer to reject a claim because you don’t have comprehensive insurance. This is because they can work out the amount that the motor insurer would have had to pay out, and use this to calculate any payout due under the GAP policy.
If your claim has been rejected because of a certain term in the policy, we’ll check that the term is relevant to the claim and that it was clearly explained. If a policy term was clearly explained, we’ll then check that it has been fairly applied.
If you think you were mis-sold the policy
We hear from people who’ve tried to make a claim on their GAP insurance, only to find they’re not covered. They then complain the policy was mis-sold. Or we hear from people who haven’t claimed, but think the policy was mis-sold.
We’ll look at all the facts to see if the seller did something wrong, and whether you lost out as a result. For example, did the seller recommend an unsuitable policy? Or did they give you enough information to make an informed choice about whether to take out the policy?
Sellers often recommend GAP. When they do, they have to make sure the policy is suitable for you.
If the seller recommended you the policy, we’ll consider whether:
- it was obvious the policy wasn’t suitable – for example, you couldn’t have benefited from it
- you actually needed it – for example, motor insurance policies often provide a new vehicle if the insured vehicle is less than a year old, so there’s often no point having GAP in the first year
- they recommended the right type of GAP policy – for example, they recommended finance GAP insurance, but because you paid such a large deposit, the policy doesn’t cover the deposit as there would never be a shortfall on the finance
- you paid more than the car was really worth
- you were told what the GAP insurance would cover – for example, some people are led to think GAP will cover finance for extra products they buy at the same time as the car
If the seller didn’t recommend the policy, they will still need to have highlighted most of these things as significant limitations or exclusions. This is so that you could have made an informed decision on the whether the policy was right for you.
Most GAP insurance policies are sold in person, so we’ll ask for information from both you and the salesperson, such as:
- the policy or key facts document
- sales documents, such as an invoice
- the GAP application
- the loan application and agreement
- any call recordings (if the policy was sold over the phone)
- any 'demands and needs' statements
If the policy was mis-sold, we need to think about how it’s affected you.
If the insurer has paid you for a claim, but it doesn’t cover the gap
Some people complain that their GAP insurance doesn’t cover everything they owe under their finance agreement. To work out what’s happened, we’ll check:
- that the payout has been worked out correctly and in line with the policy terms
- how much your motor insurer paid and whether they made any deductions
- whether there are any limitations/conditions that may affect the claim payment
Most GAP policies take off certain costs from a payout. An example of one of these costs is a ‘negative equity discount’ – which is the money still owed on the finance for a vehicle being traded-in. We find that these deductions aren’t always made clear, so the payout you receive can be less than you expected.
If there’s just been a misunderstanding about what’s owed, we’ll explain why.
Sometimes customers are unhappy with the amount their motor insurer has paid out, or they’ve already accepted an offer that’s less than their vehicle’s market value. These aren’t the GAP insurer’s responsibility, and these complaints would need to raised with your motor insurer.
Read more about our approach to vehicle valuations.
If your payout has been delayed
If your GAP insurer has accepted your claim, but is taking a long time to pay out, you may be having to continue to pay finance on your vehicle.
From our experience looking into complaints about GAP insurance, we have a good idea of how long a claim should normally take. If it’s taken longer than expected, we’ll ask your insurer to explain what’s been happening, and look into how they’ve communicated this with you.
A GAP insurer can only pay out after the claim with the motor insurer has been settled. This is because before then, the ‘gap’ isn’t known. If it turns out the delay has been caused by the motor insurer, we’ll explain that this should be raised with your motor insurer rather than the GAP insurer.
If you cancelled the policy, but didn’t get the money back
We hear from people who say that their GAP insurer hasn’t refunded any of their premiums after they’ve cancelled their policy.
We’ll check the policy terms and conditions to make sure your GAP insurer followed these when they cancelled the policy and that they’re fair. Some insurers don’t give refunds if the policy is cancelled outside the ‘cooling-off period’. We’ll check that important information like this was clearly explained to you when you were sold the policy.
If it wasn’t we may suggest you complain about the seller. And we’ll then look at whether the seller explained this to you.
How to complain
Talk to the business first. They need to have the chance to put things right. They have to give you their final response within eight weeks for most types of complaint. If you’re unhappy with their response, or if they don’t respond, let us know.
Find out how to complain.
Putting things right
We’ll normally aim to put you back in the position you’d be in if things hadn’t gone wrong.
If we think you’ve lost out because an important policy term wasn’t clearly explained, we’ll look at what would have happened if it had been clearly explained to you.
If you were mis-sold the policy, we’re likely to tell the seller to refund the premiums, and add interest on top – unless we think you would have still bought the policy. If you paid for the policy on finance, we’ll make sure this is taken into account.
In some cases, we might say you would never have bought the car if the seller had explained the policy was unsuitable. This may be because you were paying more for the car than the trade guides suggested or that you’d had negotiated a lower price for it. So we’d say any compensation you receive would need to reflect this.
We might say it's unfair for your insurer not to give any refund at all if you cancelled your policy early. We're likely to tell them to give a proportionate refund, taking off a small fee for administration. However, if you’ve already used your GAP insurance, we’d usually say it’s fair for the insurer not to give a refund.
We might award additional compensation if we think the case has been handled poorly, or if we think you’ve suffered any unnecessary distress or inconvenience – if a claim payout has been unfairly delayed, for example.
Read more about how we award compensation.
GAP insurer won’t cover full cost of finance because of policy term
Customer refuses replacement car, and claim is rejected
Customer cancels GAP policy, but receives less than expected