The 73.6% GAP Commission

The 73.6% GAP Commission: The Dealership’s “Fair Value” Must Be a Typo

There’s confidence… and then there’s audacity.

We recently had a dealership attempt to reject our GAP insurance complaint despite the fact it retained 73.6% of the customer’s payment for the product as pure commission.

Let that sink in.

Not “a healthy margin.” Not “a chunky cut”. Nearly three quarters of the ‘premium’.

So the obvious question is how, in any universe governed by maths, could anyone think that represents fair value?

It’s defence? “At the time of the vehicle purchase in 2015 there was no regulatory requirement to disclose any commission that was received as a result of arranging an insurance product”. Absolutely brilliant if it wasn’t for the scale of consumer harm.

So, by its own admission, “we could rip you off as much as we wanted to because we didn’t have to tell you”.

In this particular instance, of the £449.99 our client paid for the product, the dealership kept £331.19.

GAP Insurance Is Literally On the FCA’s Radar for Poor Value

This isn’t some niche, technical gripe. The FCA has been (slowly) circling GAP for years, and it has intervened because competition and value in the GAP market have been weak. Yet, even against this backdrop, dealerships still attempt to hide behind not having to disclose the amount of commission it took.

Back in 2015, the FCA introduced remedies aimed at preventing point-of-sale pressure and improving competition in add-on GAP insurance, explicitly to empower consumers and reduce the advantage distributors had at the dealership stage.
(FCA PS15/13)

Fast forward to the Consumer Duty era, and the FCA has been even more direct:

• In February 2024, the FCA announced that multiple firms agreed to pause sales of GAP insurance following FCA concerns about fair value.
  (FCA press release)
• The FCA has also publicly called on insurers to demonstrate fair value and good customer outcomes, specifically referencing GAP and explaining what it is and how commonly it’s sold alongside motor finance.
  (FCA press release)

This isn’t subtle. It’s the regulator, with a megaphone, saying “Stop selling poor value products to people who don’t realise they’re being mugged”.

“Fair Value” Isn’t a Vibe, It’s an Obligation

Under the FCA’s Consumer Duty, firms must ensure products provide fair value as part of the “price and value” outcome.
(FCA Handbook – PRIN 2A)

And if anyone thinks fair value is just an insurer problem, think again. GAP is typically distributed through dealerships. If you’re selling it, arranging it, recommending it, or bundling it into the transaction or financing it, you don’t get to shrug and say “Nothing to do with us, mate, we’re just the ones keeping most of the money.”

The FCA has been explicit that poor product value is a recurring harm in general insurance, and it introduced reporting and publication requirements specifically to shine a light on value.

So when a dealership retains 73.6% of the ‘premium’, it doesn’t merely raise a red flag… it raises a full-sized circus tent.

73.6% Commission: What Exactly Did the Customer Pay For?

Here’s the practical reality.

GAP insurance is meant to protect a customer if a vehicle is written off and there’s a shortfall between the insurer’s payout and the finance settlement / purchase price.

It is not meant to protect the dealership’s profit lines.

If 73.6% of the customer’s payment is commission, then one of two things must be true:

• the underlying policy cost is tiny compared to the price charged, or
• the product is priced so aggressively that the value to the consumer becomes an afterthought

Either way, the dealership’s attempted rejection of the complaint looks less like a considered position and more like “If we aggressively dismiss it, maybe it goes away.”

But it didn’t go away, because we didn’t let it go away.

The Dealership’s Rejection Attempt. A Bold Strategy but Terrible Optics

When a firm rejects a complaint, it’s effectively saying:

• our sale process was appropriate
• our pricing was justified
• our commission was fair
• the customer received fair value

So let’s play that out.

How did the dealership satisfy itself that 73.6% commission was fair value?

What comparison did it do?

• Did it compare the premium to the likely benefit a consumer could reasonably expect?
• Did it consider whether the customer could obtain equivalent cover elsewhere for materially less?
• Did it consider that the FCA has forced change in the GAP market precisely because consumers often don’t shop around at point of sale?

Or did it do the industry classic, call it “optional,” hand over a leaflet, and sprint to the signature line?

This Is Exactly Why The FCA Intervened

The FCA’s whole concern with add-on products (GAP being the poster child) is that the point-of-sale environment is perfect for poor value:

• customers are focused on the vehicle
• they’re under time pressure
• they’re overwhelmed with paperwork
• they’re primed to accept “recommended” add-ons
• and they’re least likely to price-check a product they didn’t plan to buy that day

That’s why the FCA stepped in. And that’s why a dealership taking 73.6% commission doesn’t look like a normal commercial arrangement.

It looks like a value failure by design.

What Should Happen Now

A strong regulator would step in and force the dealership to review all prior GAP sales to determine fair value.

Where fair value is lacking the dealership should contact all affected customers and offer a full refund.

The dealership should be fined, or placed under special measures until such time as it understands that 73.6% commission isn’t fair, and never has been.

Unfortunately, with a regulator that is focused on assisting the government to grow the economy, the profit revenues for the industry seem to come above consumer rights and fairness.

We’ll keep on bringing this to the attention of the FCA and FOS, until such time as change is forced.

Final Thought: If This Is “Fair Value,” Words Have No Meaning

FOS and the FCA can talk all day about outcomes, duties, and standards.

But sometimes you don’t need a policy paper to spot the problem.

Sometimes you just need a calculator.

73.6% commission is not “fair value.”
It’s a confession.

And the audacity of trying to reject the complaint afterwards is the icing on the cake, paid for, presumably, out of the remaining 26.4%.