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What’s Going on With GAP?

If you follow GAP, you may have noticed that many companies are seeing dramatically higher losses. What are the reasons this is happening? First, we need to know how we got here. After the financial crisis, loss ratios were historically low, due to the combination of robust used car prices and restrictive financing. In other words, consumers couldn’t finance much more than the car was worth and the vehicle wasn’t depreciating as fast as in the past. This double benefit had industry loss ratios for GAP Insurance below 20%. Note that industry results aren’t available for the more common GAP Waiver. In 2014 and again in 2015, those loss ratios increased by a large margin and it is likely

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