Financial Services Regulatory Authority of Ontario warns on unlicensed GAP insurance sales that may leave vehicle buyers without valid coverage

The Financial Services Regulatory Authority of Ontario has warned consumers about unlicensed sales of Guaranteed Asset Protection insurance, saying vehicle buyers could pay hundreds of dollars for coverage that may not be valid and may not pay claims. GAP insurance is commonly offered to people financing or leasing a vehicle and is intended to cover the difference between a vehicle’s actual cash value and the remaining lease or loan balance if the car is stolen or written off. FSRA said it has identified GAP products being sold by unlicensed businesses and individuals, including cases where an insurer was named even though no licensed insurer had issued the policy. Some products may be presented in a way that implies they are not insurance, including being described as a loyalty program that provides a credit toward another car if the original vehicle is stolen or damaged beyond repair. FSRA said that does not change the fact that the product is insurance and must comply with the Insurance Act. In Ontario, insurance can only be sold by licensed insurers, agents or brokers. FSRA urged consumers to confirm the name of the underwriting insurer, verify that the insurer and any participating agent or broker are licensed in Ontario, review the contract to ensure it clearly identifies the insurer and policy details, and ask how the claims process works. FSRA said it will continue to monitor the sale of GAP insurance and take action when it identifies violations of the Insurance Act. Consumers who bought GAP insurance from an unlicensed business or individual may file a complaint with FSRA.