The Financial Conduct Authority (FCA) has written to insurers calling for more action to be taken to ensure good consumer outcomes.

In letters sent to all insurers by the FCA, firms were reminded of their expectations to make sure they are checking their products and assessing that they are providing fair value to their customers.

In 2021, rules were introduced requiring insurers to ensure their products provide fair value, which included submitting regular value measures data to the FCA.

The regulator also identified further evidence that some guaranteed asset protection (GAP) products may be failing to provide fair value.

This comes as the FCA published its latest insurance value measures data for 2022, which revealed potential concerns over the value of GAP products to customers.

GAP insurance is an add-on to motor insurance and covers the difference between a vehicle’s purchase price and its current market value.

For GAP insurance, only 6% of the amount customers pay in premiums is paid out in claims, FCA data has found. The regulator has also seen examples of some firms pay out up to 70% of the value of insurance premiums in commission to parties in the distribution chain, such as motor dealerships.

The FCA has told firms manufacturing GAP insurance products they must take immediate action to prove customers are getting a fair deal, or they will intervene, giving firms a three-month ultimatum.

Director of insurance at the FCA, Matt Brewis, said: “This is an early signal of the work we’ll be doing under the Consumer Duty.

“Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided.

“If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.”

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