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common complaints and case studies

Jon

 

the GAP insurer has unfairly rejected my claim ...

We hear from people who’ve tried to make a claim on their GAP insurance - only to find they’re not covered. Some say their insurer is using a policy term that isn’t fair or wasn’t explained.

  • We’ll check that the insurer explained the features of the GAP insurance - including any significant terms - at the time they sold the policy. As GAP insurance is most commonly sold face-to-face at a car dealership, we’ll ask the seller and their customer what they remember. We’ll also check policy documents, application forms and other paperwork.
  • If the insurer gave someone personal advice about buying GAP insurance, we’ll check the advice was suitable. For example, if someone paid a large deposit and only took out a small amount of finance, it’s unlikely there would be a “gap” to cover - so they wouldn’t need GAP insurance. Or someone might have been sold GAP insurance to cover the cost of a new car, whereas they actually needed it to cover car finance.
  • If the insurer failed to mention important information - or to give suitable advice - we’ll consider whether their customer would have acted differently if they’d known this information. If we don’t think they would have acted differently, we’ll explain that they’re no worse off for the insurer’s mistake.
  • On the other hand, we might decide someone wouldn’t have taken out GAP insurance, wouldn’t have paid for the car the way they did, or wouldn’t have bought the car at all. To put things right, we’ll look at the individual circumstances - and suggest a fair, practical solution that makes sure someone’s not left out of pocket.
  • If a policy term has been clearly explained, we’ll check that it’s been fairly applied - looking at the customer’s individual circumstances.
  • If we decide a GAP insurance policy shouldn’t have been sold at all, we’re likely to tell the insurer to refund the premiums, adding 8% interest. This is unless the customer paid for the GAP policy on finance, in which case we’ll make sure this is taken into account.
  • If an important term wasn’t clearly explained, or isn’t fair in the circumstances, we’ll usually tell the GAP insurer to pay the claim - provided we think the customer wouldn’t have lost out if it had been clearly explained.

case study 1

After her car was written off, Mrs H received a payout from her car insurer. But her GAP insurer said that no “outstanding balance” remained. They said that they’d made an “adjustment” to allow for the fact that Mrs H paid more for her car than the correct market value in the trade guides at the time.

We spoke to the car dealer who sold the GAP insurance to Mrs H. They couldn’t provide any evidence that they’d made Mrs H aware of the policy term that allowed the insurer to do this when they sold the policy to her.

But we thought this was a significant policy term that should have been highlighted. We thought that if it had been, Mrs H would’ve checked and realised she was paying over the odds for the car - and negotiated a lower price. We decided that Mrs H had lost out because of the car dealer’s failure to properly highlight this term. So we told them to pay her what she’d have got from the insurer if she paid the guide price for her car.

Julie

 

the GAP insurer has paid out, but the money doesn't cover the gap ...

Some people complain that their GAP insurance won’t cover everything they owe under their car finance agreement.

  • We’ll check the GAP insurer has calculated the payout correctly - and in line with the terms of the policy. If there’s just been a misunderstanding about what’s owed, we’ll explain why.
  • If there’s an argument about whether the insurer explained the terms properly, we’ll look into whether something went wrong when the policy was sold.
  • We sometimes find that people are actually unhappy with the size of the payout from their car insurer - or that they’ve already accepted an offer that’s less than their car’s market value. This isn’t the GAP insurer’s responsibility - and we’ll explain that these types of concerns need to be raised with the car insurer.

case study 2

After his car was written off, Mr D’s insurer couldn’t find a replacement car so they paid him the market value. But his GAP insurer refused to pay out - saying that an exclusion clause meant that Mr D wouldn’t be covered if he refused a replacement car.

Mr D’s insurer had mistakenly told his GAP insurer that Mr D had turned down a replacement car. They did try to put this right by contacting the GAP insurer - but the GAP insurer refused to change their mind. We didn’t think this was fair so we told Mr D’s GAP insurer to pay the claim.

Jon

 

the insurer's taking ages to pay out - and I'm still paying the finance on the car ...

Some people complain that their GAP insurance provider is taking a long time to pay out - and that they’ve had to continue paying the finance in the meantime.

  • From our experience looking into complaints about GAP insurance, we have a good idea of how long a claim could take. If it’s taken longer than expected, we’ll ask the insurer to explain what’s been happening - and look into how they’ve communicated with their customer.
  • If we don’t think there’s a justification for the delay - or the insurer’s customer service has been poor - we’re likely to tell them to pay compensation to make up for the inconvenience.
  • GAP insurers can only pay out once the claim with the car insurer has been settled - because before then, the “gap” isn’t known. If it turns out the delay is on the car insurer’s part, we’ll explain that this can be raised with the car insurer.
Julie

 

I cancelled my GAP insurance but I didn't get my money back ...

Some people complain 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 and make sure that the insurer has followed these when handling any cancellation. Some insurers don’t give refunds if someone cancels the insurance outside the “cooling-off” period”. We’ll check the insurer made significant information like this clear when the policy was sold.
  • We might say it's unfair for an insurer not to give any refund at all if someone cancels their policy early. Instead, we're likely to tell the insurer to give a proportionate refund - taking off a small fee for administration. But if someone’s already used their GAP insurance, we generally think it’s fair that they don’t get any refund.

case study 3

Mr T took out 24 months’ GAP insurance cover, but deferred the start date for 12 months. He sold his car and cancelled his policy a year and nine months later, but received less than a third of his premiums back.

The insurer said that Mr T’s premium was based on the whole three years. Looking at the policy documents, the GAP insurer wouldn’t have had to pay a claim over the deferred period. So we didn’t think it was fair to take the deferred period into account and ask Mr T to pay for time he wasn’t covered.

The policy terms said that Mr T was entitled to a pro rata refund - so we told the insurer to do this based on 24 months of cover. The policy terms also allowed the insurer to deduct a small admin fee - which we said was fair.

need help?

If you can’t find what you’re looking for here - or you’d like to talk to someone - give us a call ...

consumer helpline - 0800 023 4567
our technical advice desk (for businesses and consumer advisers) - 020 7964 1400

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