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GAP Claims Rise: What to Watch For
Friday, September 22, 2017 6:25 AM

Jay Isaacson, Vice President of Commercial Underwriting, CUNA Mutual Group

Experts at CUNA Mutual have insight into what credit unions should be on the lookout for in regard to Guaranteed Asset Protection (GAP) insurance as claims are on the increase. GAP provides valuable protection for credit union members by allowing them to cancel the difference between an insurance settlement and their loan balance if their vehicle is stolen or totaled in an accident. However, a “perfect storm” of economic factors and auto trends has converged, increasing the number of total loss declarations filed and pushing GAP claims to record highs.

Some the factors contributing to this unprecedented rise in GAP claims include:

Extended loan terms: In Q1 of 2017, lenders reported record high averages on auto loan terms: almost 69 months for new cars and 64 months for used cars. Longer terms make payments more affordable, but they also extend the length of time borrowers must pay, leading to many owing more than their vehicle is worth.

Higher loan amounts: With the loan-to-value ratio on the rise, many borrowers find themselves under water for longer on their loans (sometimes even for as long as they own their vehicles). 

Faster depreciation: Vehicle values have depreciated more quickly in recent years, extending the length of time during which a borrower owes more than their car is worth. Even slight depreciation can have a big impact on GAP.

Higher repair costs: Today, cars are built to last and keep us safe. But these advances come with a price. Higher-cost features, safety mechanisms, and modular components cost thousands of dollars to repair.

More cars on the road and more collisions: Lower unemployment and rising consumer confidence have led consumers to purchase more vehicles. Increased traffic means more collisions, especially with drivers distracted by their smartphones and dashboard screens. 

This perfect storm of trends is impacting GAP providers across the industry. Given the steep rise in costs, it is more important than ever for credit unions to work closely with their GAP providers to maintain their competitive advantage, while helping members protect their sizable investment whenever they head out on the road.

(View this infographic to see more information on the trends that have led to the rise in GAP claims).

Jay Isaacson is vice president of commercial underwriting for CUNA Mutual Group, the leading provider of insurance and financial services to credit unions and their members. In this role, Jay is responsible for the underwriting results of the commercial product portfolio. Contact him at

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Corporate headquarters are located in Madison, Wis.

CUNA Mutual Group is a five-star endorsed business partner of Credit Union Resources, Inc., a wholly owned subsidiary of the Cornerstone Credit Union League.

1. Experian, State of the Automotive Finance Market, Q1 2017.
2. Edmunds, More Car Shoppers Are Underwater on Their Trade-Ins than Ever Before, Nov. 14, 2016.
3. Black Book, Vehicle Depreciation Report, February 2017.
4. CCC information Services, Inc., What’s Driving Total Loss Frequency, Nov. 13, 2015.