The UK’s Financial Conduct Authority has permitted four companies to restart sales of guaranteed asset protection (GAP) insurance after they acted to improve the product’s value to customers.

“I’m pleased that, following constructive engagement with industry, a significant proportion of the market is now able to restart sales,” consumers and competition executive director Sheldon Mills said. “GAP insurance can provide a useful service to customers and we continue to work with the rest of the market to address our concerns.”

Guaranteed asset protection is typically sold alongside car finance and covers the difference between a vehicle’s purchase price or outstanding finance and its current market value, in the event it is written off before repayments have been completed.

To restart sales, companies need to show their GAP products provide fair value to customers, in line with FCA rules. The regulator says those that have resumed sales are paying materially lower commissions.

More than 2.4 million GAP policies were in force in 2022, according to FCA data collected to assess product value. Only 6% of the amount customers spent on premiums was paid out in claims, with some companies paying as much as 70% of the value of premiums in commission to parties involved in sales.

The FCA wrote to providers last September calling for immediate action to prove customers were getting a fair deal, but the regulator was not satisfied with responses and announced in February that companies accounting for 80% of the market had agreed to pause sales. It has also engaged with the rest of the market.

Companies that have restarted offering the product are Fortegra Europe Insurance Company, Motors Insurance Company, Amtrust Europe and Financial & Legal Insurance Company.