Dealers are considering exiting from GAP insurance sales once the Financial Conduct Authority’s (FCA) new Consumer Duty regulations becomes mandatory from 31 July, with EMaC confirming some retailers have already closed their books on new GAP business.

The regulations are being introduced to set higher and clearer standards of consumer protection across financial services, requiring businesses to put their customers’ needs first.

This has prompted dealers to review their finance and insurance (F&I) products, processes and pricing structures to determine whether they can provide the evidence required by the FCA that they are delivering good consumer outcomes.

EMaC says the new legal requirements have led many dealers to question the feasibility of continuing to offer GAP products.

“We know from our conversations with dealers that many have evaluated the long-term viability of GAP sales. Some have already withdrawn these products, while others will not be selling them when the new rules come into force,” said Serkan Obuz, Automotive Warranty Director at EMaC.

“Under the new regulations the strong margins traditionally associated with selling GAP may need to be reduced to demonstrate to the FCA they are competitively priced against GAP products being offered online outside the dealer sales channel. For many dealers, these lower margins will render future GAP sales ,” he said.

“Retailers whose sales revenues are heavily reliant on GAP sales need to plan how they fill the void with alternatives such as maintenance plans covering warranties, servicing, MOTs, tyres and alloy wheels.

“These products ensure good outcomes by enabling consumers to select what they want to cover, while dealers benefit from regular workshop touchpoints, something they were never able to do with GAP,” said Obuz