What the FCA's latest data tells us about GAP insurance and other add-on products

Important update: The FCA redress scheme is partially suspended

This article was written before recent developments around the FCA’s redress scheme. If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

On 21 July 2026, the Financial Conduct Authority (FCA) published its general insurance value measures data 2025. While the regulator’s figures demonstrate how far the value of Guaranteed Asset Protection (GAP) insurance has moved since it intervened in the market in late 2023 and 2024, they continue to raise questions about GAP insurance and the other add-on products that motorists are commonly sold alongside a vehicle and their motor finance agreements.

This data is highly relevant for consumers who bought GAP insurance or other add-ons alongside their motor finance. Whether consumers paid for these products separately or rolled the cost into their car finance agreement, accumulating interest on the premium, the figures demonstrate how little of the price they paid actually represented the true cost of the insurance itself, and how small a proportion of these premiums was ever returned in claims.

While the price is the primary concern, as it demonstrates the extent to which hidden commission also affected GAP insurance premiums and the cost of other add-ons, the proportion returned in claims is a broader indicator of the value of an insurance product.

What does the general insurance value measures data actually measure?

The FCA requires insurers to report a set of common indicators across retail general insurance products, including:

• how often customers claim;
• how often claims are accepted;
• the average payout; and
• the proportion of premiums paid out in claims.

The last point is the one that has driven the regulator’s work on add-ons in the motor finance ecosystem. As the FCA has explained, it is one indicator of the relationship between the risk price (the cost of the insurance itself) and the total price the consumer actually pays. Under the regulator’s product governance rules and the Consumer Duty, the larger the gap between those two figures, the more a firm is expected to show why the remaining costs represent fair value.

The FCA itself is careful to say that no single measure determines whether a product offers fair value and that the data is historic. However, it nonetheless remains the clearest public picture of how these products have performed.

What the FCA’s data tells us about GAP insurance

GAP insurance has historically produced some of the lowest numbers the regulator has published.

In September 2023, the FCA called on insurers to take action after publishing its general insurance value measures data 2022, noting that, in some distribution chains:

• only 6% of the amount customers paid in premiums for GAP insurance was paid out in claims; and
• it had seen examples of some firms paying out as much as 70% of the value of insurance premiums in commission to parties in the distribution chain, such as motor dealerships.

The pattern repeated in the general insurance value measures data 2023. GAP insurance sold as an add-on recorded the lowest claims ratio of any product published, at 10%. GAP insurance sold on a standalone basis, meaning it was typically purchased directly rather than through a dealership, recorded a materially better 22%.

What the FCA did, and what changed

The regulator’s formal intervention followed in 2024:

• In February 2024, shortly after the FCA began its investigation into the historical use of discretionary commission arrangements (DCAs) in motor finance agreements, firms representing around 80% of the market agreed to pause GAP insurance sales following a request from the regulator, with a second round of engagement covering the remainder of the market the following month.
• In May 2024, the FCA confirmed that several firms had been permitted to resume selling GAP insurance after demonstrating that their products provided fair value.

The regulator described firms that had resumed sales as doing so ‘with materially lower levels of commission being paid out to those selling GAP, improving value for customers’. This highlights that commission itself was causing the primary value issue, and also why issues with GAP insurance have been closely associated with motor finance mis-selling, albeit they remain separate products.

Where the numbers stand now

The FCA cautioned that its pause distorted the 2024 figures. With sales suspended and written premiums falling while claims continued to be paid, the proportion of premiums paid out in claims exceeded 100%. The regulator warned that these figures were not representative of value or product performance.

The 2025 data shows a more settled position and offers a striking comparison. However, the FCA continues to caution that the figures may not yet be truly representative of the market. In any case, in the 2025 data, GAP insurance purchased on a standalone basis saw claims costs fall from above 100% to 53%. Set against the 7% recorded for the same standalone product in 2022 and 22% in 2023, this represents a substantial change in what consumers get for their money.

What about alloy, tyre and cosmetic cover?

Alongside GAP insurance, car dealerships also commonly offer tyre, alloy and cosmetic cover.

These products have attracted considerably less regulatory attention, but that does not mean they are free from similar issues. In the 2024 general insurance value measures data, tyre cover sold as an add-on recorded the lowest claims ratio of any insurance product the FCA covered, at 20%. The regulator has also been explicit that its concerns are not limited to GAP insurance. When publishing the 2023 data, it said it was concerned that several firms appeared to be reporting figures suggesting a large difference between the risk price and the total price paid by the customer, and that this 'may present similar risks of harm as those we identified in the GAP insurance market'.

What this means for consumers who purchased these products

Poor value alone does not equate to mis-selling, and these figures all relate to market trends rather than individual sales. However, they offer vital context for anyone sold an add-on alongside their car finance, particularly if:

• the price included a substantial and undisclosed commission;
• the product was presented as necessary or as a condition of taking the finance or acquiring the vehicle;
• the coverage was unsuitable, duplicated existing cover, or was of little practical use; or
• the cost of the policy was rolled up into the finance agreement, so that interest was paid on it for the life of the loan.

The FCA’s motor finance consumer redress scheme, finalised in Policy Statement PS26/3 on 30 March 2026 and now partially suspended pending four legal challenges it faces, does not cover other issues such as GAP insurance or additional add-on products. Complaints about these products fall outside the scheme and would need to be pursued separately, which is one of the potential benefits of instructing a solicitor to deal with a motor finance claim and a potential risk of accepting a lender’s redress offer without first seeking legal advice. If a solicitor is acting for you, they can request disclosure of the commission paid on each product purchased at the same time as the vehicle. Instructing a solicitor does not guarantee additional compensation, but it does mean the whole of the transaction is examined rather than the finance agreement in isolation.

Note that you do not need to use professional representation to engage with the regulator’s redress scheme and can complain directly to your lender and receive any compensation for which you are eligible at no cost.

Register your motor finance claim with Harcus Parker

Harcus Parker can help you identify all your motor finance agreements dating back to 6 April 2007, request disclosure to establish which add-on products you purchased, their cost, and the commission you paid on those products, and, if applicable, pursue claims in respect of those products on your behalf.

Register your claim with Harcus Parker here.