Biba Webinar Gap Insurance
BIBA WEBINAR – GAP INSURANCE
Webinar AgendaPresented to you by Mark McLaren FCA Competition Remedy The UK Vehicle Market The Importance of GAP Are customers aware of the pitfalls? Update on products with claim examples.
The FCA Competition Remedy September 2015 – FCA introduced new rules for dealers selling GAP Insurance.WHY? To achieve better customer outcomes from more informed purchasing decisions; and Improved competition. FCA recognised GAP insurance premiums are significantly higher. Almost half of customers unaware they could buy GAP elsewhere. Customers had a worse understanding of the product. They want customers to shop around.The Good News: Broker sales are on the increase, dealer sales have dropped. Such a buoyant time in the automotive sector.
The UK Vehicle Market 2016 – another record for new car sales. 2.7 million – up 2.3% from previous year. Nearly 80% of vehicles on Finance (2009 it was 40%). Growth – PCP & PCH. Plus a spike within fleets in Contract Hire. VW’s main concern was their financial debt on finance deals if car residuals dropped, not their brand! Used car market – Finance in this sector has doubled!. PCP now accepted funding. Alternatively fuelled vehicle market share over 4% for the first time.
The UK Vehicle MarketMotorcycle YTD%ChangeTotal Mopeds, Motorcycles &Tricycles (excluding Scooters7,6693,394126.0%92,57582,87311.7%Total Scooters3,3211,83081.5%36,06932,24811.8%TOTAL REGISTRATIONS10,9905,224110.4%128,644115,12111.7%
Personal Contract Purchase(PCP)BALLOON MONTHLYPAYMENTSIt’s a type of loan.Instead of paying off the entire value of the car you pay off the depreciation.Gives a low monthly paymentAt the end customer pays the balloon or hands the car backDEPOSIT
The UK Vehicle Market The market has changed – Getting a new car is like a new mobile phone contract! Buyers want the best The newest With flexibility to change to newer models. Consumers change their vehicle more regularly.
The UK Vehicle Market Is it all Positive stuff? What about the impact on residual values?
The UK Vehicle Market Surplus of used vehicles suppresses vehicle values. Lower insurance settlements. More susceptible to write offs. Affects customers financial exposure.
The UK Car MarketWHY I AM HIGHLIGHTING THIS?(apart from more car sales more GAP sales)
The UK Car Market –importance of GAP Our claim settlements are higher. Customers aren’t negotiating on the invoice price, they negotiate onthe monthly amount they can afford. Customers up spec their cars – higher specs make little difference to the market value at the date of loss– contributes to a greater shortfall as the invoice price was higher. Glass’s Guide only values 3 manufacturer upgrades in vehicles. Are your customers aware of the finance shortfall that can occur following a total loss and what are thepitfalls?
Are customers aware of thepitfalls Single biggest worry – customer’s car is written off and The settlement offer from the motor insurer is less than the outstanding finance. Customer has to get another loan to source a new replacement vehicle. Customer has to fund the deposit on another car purchase much earlier than planed. Commercial customers not protected by the consumer credit act. Termination charges beware!
Are customers aware of thepitfallsMost motor insurers settle at Market Value. Not reflective of how the vehicle has been purchased and the termination charges that can apply. Market value interpretation can very enormously from one insurer to another. Market value does not take into account additional fitted items.CUSTOMER ACUSTOMER B 15,700 15,700 425.00 City Pack 800.00 Leather Pack 400.00 Sat NavTotal: 15,740Total: 17,235GLASS’S GUIDE/MARKET VALUE AT DATE OF TOTAL LOSS: 10,290 (for both vehicles!)
Are customers aware of thepitfalls New for old replacement Contract Hire – customer not the registered keeper. Does it always apply? Effect of aggregator model
Update on Products
Traditional GAP – Competing with DealersCustomer contacts you as they have been offered GAP fromtheir dealerCashFinance(contract hire)PPP GAP(Purchase Price Protection)COMBINED PPP & FINANCEGAPSINGLE PREMIUM POLICIES – AVERAGE COVER PERIOD 3 YRSLEASEGAP
GAP Claims .Combined Purchase Price Protection & Finance GAP VW Jetta Bought for: Write off MI settlement O/S Finance GAP paid 19,968 13,300 15,772 6,668.00
GAP Claims .Purchase Price Protection Used Range Rover Evoque Bought for:Write offMI settlementGAP paid 24,048.00 20,500 3,548
The Benefits . Structured to allow you to compete exactly with a dealer offering. Saving your client 30% - 50% on the dealer premium Saving your client 10% IPT As BIBA members you also get: Access to exclusive products40% CommissionYour clients excess covered up to 250No minimum support level
Total Loss Top Up
GAP Claims .Total Loss Top Up BMW 3 Series MI settlement Top up paid 17,100 4,275
The Benefits . For brokers who require a simple extension/enhancement to the motor insurance policy. An annual based product that allows for changes of vehicle. Covers all cars and light vans up to 10 years old. No restrictions on when or how vehicle has been purchased. British car auctions – 600,000 cars sold annually. 10% go to private buyers. Autotrader/ebay Motors, local publications. Improves customer journey and any dissatisfaction over the insurer’s settlement. Simply increases the motor insurers settlement by 25%
GAP Claims .Universal GAP BMW 6 Series – Contract Hire MI settlementTermination Charge6 month rentals depositGAP paid 62,380 61,504 6,720 6,720
The Benefits . 1 GAP product that provides cover for all the GAP products shown. Designed to be broker specific. Greater flexibility for the customer. Annually renewable that allows for changes of vehicle. No maximum claim limit on vehicles up to 75,000. Enhanced cover for vehicles on contract hire. Contract certainty, Treating Customers Fairly.
Fleet GAP
GAP Claims Fleet GAPVehicle on a Contract Hire Agreement:VEHICLE9 month old Scania TruckCircumstancesTPV pulled out of layby intothe truckTermination charge 31,288.00Motor Insurers paid 22,650.00GAP policy paid 8,638.0027
The Benefits . Covers cars, vans, trucks and agricultural vehicles (wheeled) Annually renewable Allows for movements on / off the fleet Provides a benefit for vehicles owned, financed or leased Minimum of 3 vehicles
Broker support Contact us below if you are interested in: Product training (face to face or via webinar) Marketing Material Assistance with sales strategy Reviewing your add-on product range. Optional Quote and Buy system. Online administration systems Wizard How volume can be transacted via bordereau.Tel:0330 111 jacksonleeunderwriting.co.uk
September 2015 - FCA introduced new rules for dealers selling GAP Insurance. WHY? To achieve better customer outcomes from more informed purchasing decisions; and Improved competition. FCA recognised GAP insurance premiums are significantly higher. Almost half of customers unaware they could buy GAP elsewhere.
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Insurance Gap Insurance Need -Actual Cover gap: k) www.truesouth.co.za Need for insurance Earnings R0.6m Replacement requirement 54% Capitalisation factor 13.8 Insurance need R4.6m Actual insurance Retail R1.5m Group Life R0.8m Government grants R0.0m Total R2.3m R4.6m -R2.3m R2.3m Average death insurance gap for richest 20% of SA .
purchase GAP insurance 6 2.6. Add-on GAP insurance purchasers are not a homogeneous group 6 2.7. The remedies may have provided reassurance, but have not yet helped improve knowledge 6 3. Profile of research participants 8 3.1. Car purchase 8 3.2. Demographics 8 3.3. Awareness of GAP insurance 8 3.4. Purchase of GAP insurance 9 3.5.
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