GAP Insurance: A Fresh Discretionary-Commission Scandal Hiding in Plain Sight

A recent complaint response has confirmed a Discretionary Commission Arrangement (DCA) on a GAP insurance sale—and shows the dealer charging well beyond a stated 50% commission ‘cap’ agreed by the GAP distributor.

This is exactly the kind of incentive structure that has been discovered and resulted in the motor-finance commission scandal.

It points to yet more evidence of a systemic culture of mis-selling across GAP insurance add-ons that, in our view, regulators have not recognised.

GAP insurance and its other known names

GAP insurance is designed to cover the costs of any outstanding finance balance in the event a vehicle is written off or stolen.

On the face of it the insurance can be beneficial but just as with PPI it has been subjected to hidden commission incentives and sold to drive huge profits.

GAP insurance is sold under different guises and names, such as:

• Guaranteed Asset Protection (GAP)
• Shortfall Insurance / Total Loss Shortfall Insurance
• Negative Equity Cover
• Return to Invoice (RTI)
• Vehicle Replacement Insurance (VRI)
• Finance GAP / Finance Shortfall Insurance
• Contract Hire GAP (CHG) / Lease GAP
• Return to Value (RTV) / Back to Invoice/Value
• Agreed Value GAP
• Purchase Price Protection (PPP)
• Auto Equity Protection

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The smoking gun

In the document we’ve received, the distributor explains that it set the net price of the policy and applied a 50% commission cap allowance, leaving the dealership to decide the actual commission it would receive. It then cites hard numbers from the case:

• Net price of the GAP policy provided by the insurance distributor: £85.00
• Total price paid by the consumer: £151.50
• Implied commission / markup: £66.50

That’s a 78.2% uplift on the net price, and £24 above what a 50% cap (£42.50) would allow—clear evidence of discretion and over-charging in practice.

Why this matters: once a dealer is given latitude to “pick” the commission within a cap, they have a direct financial incentive to inflate the premium—precisely the dynamic that fuelled Discretionary Commission Arrangements in motor finance.

Why this looks like motor finance commission all over again

• Dealer discretion over price = conflicted sales. The person “recommending” the cover controls their own reward.
• Opaque pricing. Customers see a single figure at the desk; the net/commission is hidden, so informed consent is impossible.
• Weak suitability checks. Add-on insurances are often sold at speed, with limited demands-and-needs assessment and scant disclosure of exclusions or duplication.
• Harm is scalable. If one dealership is doing this, the model can repeat across multiple dealerships over years, multiplying consumer detriment.

How widespread could this be?

Let’s be candid, this will not be a one off case that we have uncovered.

• GAP has been a high-margin, high-volume add-on for many years.
• Distributors / administrators seem to set a net price, giving dealerships opportunity to inflate commission and profits.
• If “up to 50%” discretion is written into commercial terms, many retailers will use it—and sometimes exceed it, as the case above proves.
• Even after 2015’s add-on rules (e.g., deferred opt-in for GAP), commission structures often survived behind the scenes; the sales choreography changed, the incentives clearly didn’t.

Our view: this pattern could be industry-wide, spanning multiple dealerships groups and administrators over a long period.

Where’s the FCA in all this?

The FCA’s forced intervention on discretionary commission has (so far) focused on motor-finance credit.

GAP commission within insurance add-ons appears to have received far less attention—despite identical incentive risks and consumer harm.

On the face of the clear evidence we’ve seen, it looks like another regulatory blind spot that now warrants urgent scrutiny.

What this means for consumers (and claims)

• If you bought GAP at a dealership, there’s a real prospect you overpaid due to hidden commission.
• Redress isn’t just the premium—it can include contractual interest charged on financed premiums, plus statutory interest.
• Creditors may share liability where the GAP premium was financed (e.g., under s56/75 CCA), mirroring the path taken in motor-finance commission claims.

Mis-selling culture created over decades

When an insurance distributor or underwriter hands pricing discretion to a dealership and a case then shows the dealership blowing past even that overly generous commission cap, you don’t have an isolated mistake—you have a design problem.

That’s the hallmark of industry wide systemic mis-selling on a huge scale.

The Supreme Court passed clear judgment with respect to discretionary commission arrangements, which now appear to have been used in the sale of insurance products as well as motor finance agreements.

The sooner this is treated with the same seriousness as PPI and motor-finance DCA, the better it will be for consumers.

Source document confirming the 50% cap, the dealer’s discretion, and the £85 vs £151.50 figures is on file.