Avid Insurance Services Ltd (Avid), the fast-growing MGA that recently acquired IIGL, has launched its first A-rated GAP insurance product into the retail auto market.
Steve Duxbury, head of ancillary motor at Avid, said the product is a ‘big vote of confidence’ in UK Gap.
He said the launch also underscored Avid’s strategy to bring profitable underwriting to what has been a challenging sector in recent years and to build long term sustainable partnerships with Avid’s new capacity. Steve explained that Avid’s ambition is to lead by example and bring a renewed emphasis on A-rated capacity for niche products within the MGA sector.
He said: “It’s vital for market confidence that we provide stability for ancillary segments and apply the same disciplined approach to underwriting as elsewhere; achieving this will attract more A-rated paper and create a virtuous circle for the MGA model.”
The Avid GAP product, which has received approval from Lloyds, will be offered to customers initially through three online retailers, a sales channel that Steve said has grown considerably in recent years, after FCA created a four day deferral period which has enabled customers to shop around rather than have to buy it from a car dealer.
“Publicity given to GAP from consumer champions like Martin Lewis has made GAP a better understood product. Combined with the FCA changes, the result is growth in the online GAP market, not just via retailers but also through the aggregators, which started selling GAP two years ago.
“Steve said that GAP accounts for nearly 10% of the £2.2bn motor ancillary sector, at £215m in 2018 (source: Finnaccord – the most recent available figures). £117m of GAP cover was taken out for new vehicles, and the rest (£98m) for used. GAP products typically sell online for between £100-250 annual premium and can be £250 upwards within dealerships.
He explained that the huge growth in motor financing variations as well as increased consumer awareness was behind the popularity of GAP, especially with PCP arrangements, accounting for 63% of all finance deals, which deliver lower monthly premiums but a larger lump sum to pay at the end of the agreement, risking a significant financial loss in the event of a write off.
Steve said that the pandemic has changed how manufacturers market their vehicles, with more and more people buying online without seeing the car they buy. “This will become the norm, driven by the success of Cazoo and Carwow, and the challenge is for mainstream dealers to catch up, including how they sell financial services add-ons like GAP.
He noted: “Previously GAP insurance has often been underwritten by offshore, unrated GAP insurers who withdrew from the market when they stopped making money. Our A-rated product will give retailers and customers much more confidence in GAP.”
Steve said that GAP is the first new product launch for his team since he joined Avid in January this year. He said that, now that Avid has received Lloyds approval, his team will begin work on building a range of A-rated ancillary products.