Making guarantees, gap coverage guarantees and other motor vehicle productsAMF position on various motor vehicle products


Montréal – The Autorité des marchés financiers (AMF) today released two notices pertaining to motor vehicle insurance products that will have an impact on the distribution of marking and gap coverage guarantees.

On March 27, 2009, the AMF published a Notice announcing that replacement guarantees would constitute insurance products subject to AMF oversight. As part of its analysis of replacement guarantees, the AMF noted that other motor vehicle products might also be considered insurance products.

Notice related to motor vehicle insurance products

Rather than making a determination in respect of each existing or future motor vehicle insurance product, the AMF elected to establish what it deems an insurance product to be.

Accordingly, the AMF considers a motor vehicle insurance product to be:

  1. a product offered at the time of sale or lease of a motor vehicle or a component or accessory thereto; and

  2. a product providing for payment of an indemnity on the occurrence of an event resulting from a specified risk (loss, theft, accident, vandalism) in consideration of payment of its purchase price.

This Notice does not cover the activity of marking, which identifies vehicle parts to deter theft and/or help locate stolen items. Manufacturers of marking products that pay an indemnity in the event of theft must limit the pay-out to the acquisition cost, withdraw the indemnity or pull their product from the market no later than July 30, 2010. These conditions do not apply to insurers.

Notice related to gap coverage guarantees

The AMF is also publishing a notice related specifically to gap coverage guarantees, given the particularities of this product. Gap coverage insurance guarantees the difference between the outstanding loan balance on a vehicle and its value at the time of a total loss. Where a person other than the creditor or lessor of the vehicle provides such coverage, the AMF considers the guarantee to be an insurance product. However, where a creditor or lessor waives its right to claim the gap in a contract, such waiver is in favour of the purchaser or lessee and therefore not considered to be insurance coverage.

The above-mentioned insurance products must now be issued by a registered insurer and distributed by a representative certified by the AMF. Replacement insurance is the only exception to this rule, since it may be offered through an authorized distributor.

These notices (Avis de l’Autorité des marchés financiers relatif à l’offre de la garantie d’écart and Avis de l’Autorité des marchés financiers relatif à l’offre de produits afférents à un véhicule) and Q&As will be published in section 3.1 of AMF Bulletin (pdf - 55 KB)This link will open in a new windowUpdated on April 30, 2010, volume 7, number 17, dated April 30, 2010.

The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec’s financial sector.

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