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ombudsman news

issue 101

March/April 2012


a consumer recently came to our advice centre with problems about her car finance and associated 'gap' insurance. I'd not heard about this kind of insurance before. Is it covered by the ombudsman?

Guaranteed Asset Protection ('GAP') insurance was originally sold to cover any shortfall - or 'gap' - between:

  • the amount paid out by a motor insurance policy if the vehicle was written off; and
  • the amount still to be repaid on the finance that was taken out to buy the vehicle in the first place.

There are now other types of GAP cover available on the market. These include 'new car GAP insurance', which is specifically based on the price of a new vehicle, of the same model and specification, at the time of the claim - less the amount the motor insurer pays out.

Last year we received 200 or so complaints involving GAP insurance - and we upheld around half in favour of the consumer.

In these cases, the consumers generally complained to us that a GAP policy had been wrongly sold to them - or that the cover was not correctly described.

People also complain that the amount the insurer paid out was not enough to pay off all the outstanding finance - or that they cancelled their policy but the insurer would not refund any of the premiums.

And as with all insurance disputes, we continue to see cases about claims being rejected - and delays in paying out claims.

We have recently added information about our general approach to GAP insurance complaints on our online technical resource - available in the publications section of our website.

why do you use the ugly acronym 'FOS' - which is meaningless to most consumers?

We don't. We say Financial Ombudsman Service in full - or just 'the ombudsman'. People who work in financial services sometimes refer to us as the 'FOS' - as a form of shorthand.

Shorthand is fine if you and the people you're using it with all understand it. But otherwise, we agree that it's meaningless.

People in financial services use a lot of abbreviations and acronyms. Sadly, it's often this kind of shorthand and jargon that leads to the communication problems underlying many of the disputes referred to us.

Our research shows that around 75% of adults in the UK know about the Financial Ombudsman Service - and recognise who we are and what we do.

Only a very much smaller number of people recognise the acronym 'FOS' - and in recent research, consumers responded very negatively to this acronym - so we prefer not to use it.