ITC Denied Setting Its GAP Insurance Commission. The Contract Says Otherwise.

The sheer audacity of ITC Compliance Limited’s representations to the Financial Ombudsman Service (FOS) is quite extraordinary. In a recent GAP insurance complaint, ITC, and it’s Peter Vardy dealership, attempted to distance itself from responsibility for setting the commission it received. Unfortunately for ITC, the contractual evidence supplied to FOS told a very different story.

The provisional Ombudsman decision received exposes a remarkable contradiction between what ITC told FOS and the commercial arrangements under which it sold GAP insurance to its customer.

ITC denied setting its commission. The contract exposed the truth.

On page six of the decision, the Ombudsman records ITC’s position:

“ITC say they didn’t set the commission, and it’s the product manufacturer who is responsible for this.”

However, the product co-manufacturer provided FOS with an extract from its contract with ITC, confirming that responsibility for setting the retail selling price rested with ITC itself.

The manufacturer explained that it supplied the product at a net rate, comprising the insurance risk premium and administration fee, leaving ITC responsible for determining the final retail price, including its own commission.

The Ombudsman concluded:

“Overall, based on the information I’ve seen, I’m more persuaded that ITC were responsible for setting the retail price – and therefore the commission – and in this case the commission represented 69.9% of the total price.”

How ITC could possibly consider it appropriate to tell FOS that it was not responsible for setting its commission, when the contractual arrangements demonstrated otherwise, is beyond us.

In our opinion, this is an astonishing attempt to distance itself from the very commercial arrangements from which it profited. Whether the explanation was deliberately misleading or simply indefensible, it raises serious questions about the accuracy of the representations firms are prepared to make when defending consumer complaints.

“May” receive commission, despite setting it themselves

ITC’s approach to disclosure at the point of sale was arguably just as concerning.

Its Initial Disclosure Document stated:

“We do not charge fees for arranging insurance, we may however receive an economic benefit or retain a part of any premium by way of remuneration.”

“May” receive commission?

ITC was not simply a passive intermediary that might receive an unknown payment from an insurer. According to the contractual evidence considered by the Ombudsman, ITC was responsible for setting the retail selling price and, consequently, the commission it would receive.

Yet the customer was presented with wording suggesting that commission was merely a possibility, rather than an established feature of the sale.

The Ombudsman was not persuaded that this wording was clear, fair and not misleading, or compliant with the applicable remuneration disclosure requirements under ICOBS 4.3.7R.

In our view, this goes to the heart of the culture surrounding GAP insurance sales. A firm that determines its own financial reward cannot be permitted to hide behind ambiguous language suggesting that it might receive commission, particularly where the customer has no meaningful understanding of the commercial arrangement.

69.9% of the customer’s payment was commission

Perhaps the most damning aspect of this case is the amount involved.

The evidence accepted provisionally by the Ombudsman showed that the customer paid £349 for the GAP insurance policy, of which £243.83 represented commission; an extraordinary 69.9% of the total price.

It is difficult to comprehend how a business can receive almost 70% of the price paid by a consumer, exercise control over the commission-generating selling price, fail to explain that arrangement adequately to the customer and then suggest to FOS that responsibility for setting the commission lay elsewhere.

This is precisely the type of conduct that raises fundamental questions about the GAP insurance industry’s approach to consumer transparency, fair treatment and accountability.

We have repeatedly raised concerns about the extraordinary levels of remuneration concealed within GAP insurance sales and the resistance encountered when those arrangements are challenged. This case provides another troubling example of why the underlying contractual evidence must be scrutinised rather than simply accepting a firm’s explanation of its own conduct.

In our opinion, ITC’s position demonstrates a breathtaking disregard for the importance of providing FOS with an accurate account of the arrangements under investigation. The contradiction between its explanation and the contractual evidence deserves particular attention.

It should be noted that this is presently a provisional Ombudsman decision, rather than a final determination. Nevertheless, having considered the evidence, the Ombudsman’s stated provisional decision is to uphold the complaint.