Guaranteed Asset Protection Insurance Market - Global Guaranteed Asset Protection Insurance Industry Analysis, Size, Share, Growth, Trends, Regional Outlook, and Forecast 2023-2030

Increasing Vehicle Sales and Growing Awareness Drive GAP Insurance Market Growth

The global guaranteed asset protection (GAP) insurance market is poised for remarkable growth, with a projected compound annual growth rate (CAGR) of 10.3% from 2023 to 2030. By the end of 2030, the market value for GAP insurance is expected to reach approximately US$6.95 billion. This growth is primarily attributed to the increasing demand for GAP insurance driven by rising vehicle sales, higher demand for car loans and leases, and a consistent uptick in accidents and auto thefts worldwide.

Rising Demand in GAP Insurance Market

GAP insurance provides crucial financial protection for individuals who finance or lease vehicles, bridging the gap between the vehicle's value and the outstanding loan or lease amount. This discrepancy often arises due to factors such as depreciation, interest, and associated costs. When a vehicle is stolen or declared a total loss following an accident, insurance companies typically compensate for the car's actual worth, which can be significantly less than the remaining loan or lease balance.

One of the key drivers of the demand for GAP insurance is the robust growth in global automobile sales. For example, in Germany, auto sales surged from 241,330 in March 2022 to 281,361 in March 2023, as reported by the Automotive Industry Portal. The increasing number of vehicles on the road translates into a larger potential customer base for GAP insurance providers.

Key Report Findings

The GAP insurance market is expected to exhibit substantial revenue growth during the period from 2023 to 2030. Several factors are shaping this market, including the rise in vehicle sales, increasing demand for car loans and leases, and the continuous growth in accidents and auto thefts. Finance GAP insurance is expected to maintain a higher demand in the market. In 2022, the passenger cars category held the largest revenue share in the GAP insurance market. Asia Pacific is expected to lead the market, while North America is projected to experience the strongest growth by 2030.

Driving Factors

• High Security and Reduced Risk on Motor Vehicles: The depreciation of vehicles after purchase can be as high as 20 to 30% of the total value. However, the outstanding loan amount remains unaffected by depreciation and must be paid regardless of the vehicle's condition or the borrower's circumstances. GAP insurance serves to bridge this gap between the remaining loan amount and the depreciated value of vehicles. It ensures that consumers are not burdened with substantial financial loss in cases of theft, loss, or destruction of their vehicles, thereby driving the growth of the GAP insurance market.
• Quick Claim Settlement: GAP insurance offers a faster claim settlement process compared to traditional insurance, especially in cases involving accidents leading to bodily harm or fatalities. While third-party insurance claims can take a long time to resolve, GAP insurance expedites the settlement process when the necessary documentation is received and the motor insurance claim is fully resolved. This speed in claims settlement contributes to the growth of the GAP insurance industry.

Market Opportunity

Increased Use of AI to Unlock Various Opportunities: The GAP insurance industry has opportunities to leverage innovative technologies such as Artificial Intelligence (AI) and telematics. By integrating AI, cloud services, advanced mobile technology, and cybersecurity measures, the industry can enhance customer service, streamline operations, and address evolving customer needs while maintaining security.

Overview of Key Segments

• Dominance of Finance GAP Insurance Type: The financial GAP insurance segment is expected to hold the largest revenue share over the forecast period. This segment's growth is driven by its ability to offer repurchase and financing agreements for vehicles, often covering up to 100% of the original purchase price. Additionally, these agreements allow customers to secure auto loans without upfront payments, contributing to the segment's growth.
• Passenger Cars Remain the Leading Vehicle Type: The increasing use of passenger cars, coupled with rising disposable incomes and a growing need for mobility, fuels the demand for GAP insurance policies. The introduction of new automotive technologies, including autonomous driving, further encourages adoption rates as consumers become more concerned about potential losses related to traditional transportation methods. Commercial vehicles, crucial to many businesses, also contribute significantly to the GAP insurance market due to the substantial costs incurred in case of accidents

Growth Opportunities Across Regions

• Asia Pacific Tops the Charts: The Asia Pacific region is at the forefront of the GAP insurance market, driven by the official requirement of commercial auto insurance for most business-related vehicles. Rising automobile sales in countries like China and India, coupled with factors such as increased disposable income, population growth, and economic development, contribute to the region's market leadership.
• North America Grows Lucrative: North America's early adoption of insurance and high car ownership rates are significant factors contributing to market growth. The presence of major industry players and their innovative insurance policies further stimulate growth. The United States and Canada are expected to witness substantial revenue growth in the GAP insurance market.

Growth Challenges

Tightening Regulatory Scrutiny on Insurance Players: The increasing frequency of regulations and regulatory bodies, such as the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority (APRA) in Australia, and the National Association of Insurance Commissioners in the United States, poses challenges to insurance companies. Stringent government rules and requirements for the GAP insurance industry may affect insurance firms' income and hinder the global GAP insurance market's growth.

GAP Insurance Market: Competitive Landscape

Leading players in the GAP insurance market include Zurich, Direct Gap, American Family Insurance, AXA, Admiral Group PLC, Allstate Insurance Company, State Farm Mutual Automobile Insurance Company, Nationwide Mutual Insurance Company, Aviva, Chubb, Liberty Mutual Insurance Company, Allianz, Progressive Casualty Insurance Company, Berkshire Hathaway Inc., Majesco, Kemper Corporation, and The Travelers Indemnity Company.