Associate & Principal Analyst
Mind the Gap
On Track - May 2019
Are fraudsters targeting GAP Insurance claims?
Often sold by car salesmen, GAP (Guaranteed Asset Protection) insurance covers the difference between the amount originally paid for a vehicle and the sum an insurance company pays should it be written off or stolen, which is valued at the time of the incident.
On average, according to CAP, a three-year-old car's value will drop 14% in the first year, 24% in the second and 33% in the third year. This is significantly less than the 60% average fall for new cars in the first three years.
A variation of the original style of Gap insurance is Vehicle Replacement Insurance (VRI). In the event of a write off, VRI covers the difference between a motor insurance payout and the cost of replacing a vehicle to the exact specification, even if the price of the new replacement car has increased.
Another similar product is known as Return to Invoice Insurance (RTI). This pays out the difference between the depreciated total loss (post-accident or post-theft) amount covered by comprehensive motor insurance, and the original amount that the vehicle was purchased for (i.e. the invoice total). Basically, the claimant does not lose any money.
Keoghs has recently run a number of checks through our intelligence system on GAP claims, specifically related to VRI or RTI, which have commenced one month from the end of policy life resulting in a GAP claim payment of more than £20,000. Although this is now an ongoing project, links between such claims and previous suspicious claims has proven to be both unexpected and worrying.
Of additional concern is that, without exception, motor insurers had already settled their loss without any knowledge of the specifics related to the GAP claim.
Case in point
To use a specific example, we investigated a RTI GAP claim, where the vehicle concerned was a top of the line Range Rover, valued at £118,000. The owner reported that a third party vehicle had collided with his Range Rover whilst parked at the roadside, at a rural location, in front of his gated detached bungalow.
On the face of it this looked like a normal incident, and the insurer settled their liability with the claimant. However, a little digging revealed that the collision occurred on the next to last day of the relevant RTI GAP policy, in which the claimant stood to gain £50,000. Additionally, the original purchase was a cash buy, so there was no outstanding finance payment to settle.
Again, maybe not too much of a concern, but more investigation revealed that the claimant made a similar claim, in almost identical circumstances four years previously, in which his BMW X5 was written-off after a vehicle collided with it whilst avoiding apheasant outside his home address.
In this instance the claimant received a RTI
GAP settlement of £35,000.
Furthermore, although the full details are not yet known, similar claims have been submitted by the claimant’s wife and his daughter's vehicles.
A gap in detection?
The question must therefore be asked, would the motor insurers have settled the claim on the Range Rover had they been aware of the full circumstances. With this in mind, consideration should be given to three questions when analysing a claim which fits the given criteria.
1. Is there any GAP policy?
2. If so, is it RTI or VRI?
3. When does that GAP policy expire?
If the claim ticks the relevant boxes, this may help identify the authenticity of a particular claim.
Our investigations are ongoing and we will report back with further details so watch this space. However, in the meantime we advise vigilance when dealing with GAP insurance claims.