AMF targets automobile insurance practices

Insurance

Montréal - To help ensure consumers are treated fairly, the Autorité des marchés financiers (the "AMF") is setting up measures to put a stop to non-compliant commercial practices pertaining to the sale of automobile insurance.

These measures follow four years of overseeing replacement insurance and related commercial practices. During this period, the AMF took action several times to remind industry participants of their legal obligations.

"Investigations and other work have led to the sanctions announced today regarding several automobile dealers and one damage insurance firm. As well, we would advise all industry participants to immediately cease non-compliant practices as indicated in a notice that is also being published today," said Louis Morisset, President and CEO of the AMF. "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," he added.

Sanctions against dealers and firm

The AMF launched proceedings for sanctions against the commercial practices of nine automobile dealers and one damage insurance firm.

The AMF noted 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 (Q.P.F. No. 1), which may only be offered by damage insurance agents and brokers registered with the AMF. Customers were also offered replacement insurance (Q.P.F. No. 5).

Some of the dealers also 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 AMF therefore issued orders 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.

These dealers have filed applications in Superior Court for a review of the orders.

Moreover, the Bureau de décision et de révision ("Bureau") took note of the agreement entered into between the AMF and the insurance firm Rochefort, Perron, Billette et associés inc. The Bureau approved the joint recommendations of the parties to impose a $45,000 fine and order the firm and its responsible officer, Alain Houle, 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.

Non-compliant practices must stop

In the notice (pdf - 123 KB)This link will open in a new windowUpdated on February 19, 2015"notice, replacement insurance, non-compliant, practices" published today, the AMF gives a list of the practices that do not comply with An Act respecting insurance and An Act respecting the distribution of financial products and services. It advises those involved in the automobile insurance business that it intends to take the necessary steps to ensure that consumers are treated fairly.

Non-compliant practices include, other than the ones identified through the investigations mentioned above:

  • 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 (replace the vehicle through the designated dealer or receive an indemnity so the consumer can have his vehicle replaced through the dealer of his choice) when they purchased 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;
  • Making financing conditional on the customer purchasing an insurance product.

The AMF has also informed insurers operating in the replacement insurance market in Québec about its concerns regarding non-compliant practices.

Consumers should shop around-it's to their advantage!

The AMF reminds consumers of points that will help them make an informed decision when purchasing insurance products relating to the purchase of an automobile.

  • Only a damage insurance agent or broker registered with the AMF is authorized to provide advice about insurance and compare available automobile insurance products.
  • If you finance the purchase of your vehicle, the dealer can offer you life, health and loss of employment insurance. Although some finance companies require that you take out this type of insurance, you are free to purchase it from the insurer of your choice. Your current life insurance may also be sufficient to cover your car loan. Check what insurance you already have and shop around to find the best product for you.
  • The dealer may offer you replacement insurance, which is also available through a damage insurance agent or broker. Only an agent or broker can also offer you a replacement cost endorsement which can be attached to an automobile insurance policy. Take the time to compare these products before you make a decision.
  • Before you buy an insurance product from an automobile dealer, always make sure you receive all the information you need to make an informed choice. Make sure you have received a copy of the Distribution Guide and an explanation of what is covered and what is excluded, before purchasing the product.

Visit the AMF's website for more tips on how to make informed choices about automobile insurance.

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

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