Quebec brokers still have concerns about the way the province’s car dealers are selling motor vehicle replacement guarantees, roughly two years after the regulator brought the car dealers under the same regulations as insurance brokers.
Brokers are concerned about the high-pressure tactics the province’s car dealers are using to sell replacement guarantees or warranties at point of sale. The courts have determined recently that these guarantees are insurance products.
Under these guarantees, an insurance company agrees, in the event of total loss, to replace the insured automobile based on an option selected by the consumer. In the event of a partial loss, the insurer agrees to replace damaged parts.
Brokers believe some consumers may not be aware that the dealers are selling the replacement cost guarantees at much higher sales margins – and hence overall price – than the same product sold by brokers, said Charles-Antoine Carra of Lareau Insurance Brokers in Quebec.
“We’re making a margin of $100 or $200,” Carra said of the broker’s take on the sale of a replacement cost guarantee product. “We’re not putting a lot of pressure on clients. But the car dealers are putting loads of pressure [on consumers], because they are making $800 [on the product]…
“Some clients are calling us and they already have two or three quotes coming from the dealer. In what way, I’m not really sure. Sometimes they are coming from brokers, sometimes they are coming from direct insurance companies.”
In collaboration with the province’s insurance regulator, the Autorité des marchés financiers (AMF), Protegez-vous published a special insurance edition in late 2012. It contained a number of quotes that illustrate the difference between prices for guaranteed replacement guarantees offered by car dealers and insurance brokers. For example, a seven-year guarantee sold to the consumer might be $1,936, whereas the same policy sold by a broker might be worth $1,349.
“Consumers are paying a lot more for these warranties than they would for a proper insurance policy for the same thing,” said RCCAQ chair Catherine Mainguy. “The consumer ends up being penalized a lot.”
The broker association has set up a special email address, [email protected], for consumers to send in their horror stories of buying insurance products from car dealers. “We want to be aware of consumers being tricked into doing something that they don’t want to do,” she said. “We hear all of these stories, but we need to document them.”
For its part, the AMF said it does not have any formal public consultations addressing the issue, although it may have come up in the regulator’s private meetings with brokers.
In 2009, the AMF sent out a bulletin stating: “In the opinion of the AMF, a motor vehicle replacement guarantee is an insurance product subject to AMF oversight.” In that bulletin, the AMF gave car dealers 12 months to become compliant with the same regulations that govern insurance brokers in the province.
The AMF published a standard replacement insurance form, the Q.P.F No. 5, for use by both car dealers and insurance brokers in 2010.
