February 19, 2015 by Canadian Underwriter
With a view to ensuring customers are treated fairly, the Autorité des marchés financiers (AMF) has launched proceedings for sanctions against the commercial practices of nine automobile dealers and one damage insurance firm in Quebec related to the unauthorized sale of automobile insurance.
The regulatory and oversight body for Québec’s financial industry notes in a statement that when purchasing an automobile from the nine dealers in question, some customers were offered automobile insurance products covering civil liability and damage to the vehicle.
“Only a damage insurance agent or broker registered with the AMF is authorized to provide advice about insurance and compare available automobile insurance products,” the AMF reports.
Beyond those insurance products, customers were also offered replacement insurance. Some dealers “failed to adequately describe the replacement insurance offered to customers and specify what was covered, or they offered a lower financing rate if the customer took out replacement insurance through the dealer,” the statement adds.
“The dealer may offer you replacement insurance, which is also available through a damage insurance agent or broker,” AMF explains. “Only an agent or broker can also offer you a replacement cost endorsement, which can be attached to an automobile insurance policy.”
In light of the non-compliance, AMF has issued orders – the dealers have responded by filing applications in Superior Court for a review – imposing administrative sanctions against the following automobile dealers:
• 4432231 Canada Inc. (Hyundai Vaudreuil) was fined $15,000;
• Hyundai Lanaudière (2622-3412 Québec inc.) was fined $10,000;
• Volkswagen Laurentides (Automobiles Lafontaine 2000 inc.) was fined $12,500;
• Riendeau Hyundai (2845-6630 Québec inc.) was fined $10,000;
• Honda de Terrebonne (Automobiles Donald Brassard inc.) was fined $15,000;
• Volkswagen de l’Estrie (Sherbrooke automobiles inc.) was fined $15,000;
• Honda de Blainville (2848-7403 Québec inc.) was fined $10,000;
• Hyundai de Sherbrooke (Garage Renaud Fortier inc.) was fined $12,500;
• Toyota Magog (2709970 Canada inc.) was fined $17,500.
The Bureau de décision et de révision also examined the agreement entered into between the AMF and insurance firm Rochefort, Perron, Billette et associés inc., opting to approve the joint recommendations of the parties to impose a $45,000 fine. In addition, the firm and its responsible officer, Alain Houle, have been ordered to comply with An Act respecting the distribution of financial products and services.
“Under the agreement, the firm acknowledges that certain representatives did not give consumers enough advice and information regarding the proposed product and the coverage that could have been offered to meet their needs,” states AMF.
A notice published earlier this week by AMF makes clear to those involved in the automobile insurance business in Quebec that the regulatory body intends to take the necessary steps to ensure consumers are treated fairly. The notice also provides a list of practices that do not comply with An Act respecting insurance and An Act respecting the distribution of financial products and services.
Among those non-compliant practices are the following:
• including the balance of a previous debt in the purchase price of the vehicle indicated in the replacement insurance contract;
• failing to offer consumers two options in the event of a loss when they purchase replacement insurance;
• compelling a customer to have his vehicle repaired with a specific dealer in the event of a partial loss;
• failing to indicate to customers the commission received, if it exceeds 30% of the insurance premium; and
• making financing conditional on the customer purchasing an insurance product.
“We would advise all industry participants to immediately cease non-compliant practices as indicated in a notice,” Louis Morisset, AMF’s president and CEO, says in the statement. “The fair treatment of consumers is of concern to the AMF so we are giving them advice to help them make more informed decisions when they buy insurance products relating to the purchase or lease of an automobile.”
AMF has been overseeing replacement insurance and related commercial practices over the last four years – during which time it has taken action several times to remind industry participants of their legal obligations – to help put a stop to non-compliant commercial practices around the sale of automobile insurance.
The move by AMF marks a new step in the fight to end these practices, which are harmful to both consumers and the industry itself, notes a statement from the Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ).
“We have been working to denounce these illegal practices for nearly three years now,” says RCCAQ chair Vincent Gaudreau. “This first wave of penalties confirms the validity of our initiatives aimed at ensuring strict enforcement of the law,” Gaudreau notes of efforts by RCCAQ, which represents some 4,200 brokers working in 600 firms and branch offices around Quebec.
Welcoming the initial steps taken by AMF, RCCAQ nonetheless notes that more needs to be done. “We are aware that the decision to impose fines on abusive dealers will have a positive impact, although this does not actually close the matter,” Gaudreau says.
“Our role as brokers involves serving our clients and defending their interests. That’s why we are determined to keep pursuing our efforts until this situation has been eradicated completely,” he emphasizes.
RCCAQ reminds clients that when purchasing a new vehicle, there are only two options that provide coverage in the event of a total or partial loss of the vehicle: replacement insurance (a form of supplementary coverage) or the replacement value endorsement (an option included in the auto insurance policy).
“Both of these products, which are broadly comparable, are available from insurance brokers; brokers have the expertise to explain the advantages of each,” the statement adds.