Financial Conduct Authority Halts Guaranteed Protection of Asset Policy Sales

We believe the announcement on Feb. 9 that the U.K.'s Financial Conduct Authority has agreed with the majority of the market to halt guaranteed protection of asset policy sales is a good thing and improves the unknown conditions surrounding these companies. Guaranteed asset protection has been sold to insurer policyholders against the difference between the initial purchase price of a vehicle and the outstanding value. The FCA's complaint stems from its findings that only 6% of the amount customers pay in premiums for guaranteed asset protection policies is paid out in claims. The regulator’s bone of contention is that it does not offer value for money. This marks the third intervention by the regulator into personal insurers, following general insurance pricing reforms and an investigation into premium financing. We think these investigations are coming to an end. We maintain our fair value estimates and moat ratings for Admiral and Direct Line.