June 27, 2018 13:30
Photo : Freepik
Following numerous consumer complaints, thefinancial markets Authority has decided to tighten requirements to the car dealers, which make the distribution of certain insurance products and insurers in the market.
“The main grounds of reports received relate to the explanations or disclosures incomplete or inadequate [and] the sales techniques used by some dealers to force the sale of insurance products,” stresses the Authority, which wants to “correct poor business practices” with these additional measures.
Among other measures, the Authority eliminates the option of compensation for replacement of the vehicle through the named dealer. She said that it was sometimes the only option presented to the consumer and that it was selected by default in the proposal form of insurance. This amendment will come into force on December 1, 2018.
Compensation practices in the crosshairs
The Authority dedicates three of the six measures to compensation practices. Thus, dealers will not be able to distribute a range of products that offer similar protections, but for which the compensation is different, in order to avoid ” suggest a product based solely on the potential compensation “.
In addition, insurers may need to develop information sheets that will reflect the items disclosed to consumers, that they will sign. These cards will attract the attention of customers on certain items related to the product and will contain information on compensation and insurance, not required from a designated insurer.
The regulator also extends the vesting period of the compensation to a minimum of 180 days, since several of the dealers suggested to cancel the purchase of an insurance product after this period, advance to the Authority.
Responsibility on the shoulders of the insurers
In addition to the additional obligations of the concessionaires, the Authority added responsibilities on the shoulders of insurers. They will have to train the representatives on the insurance products, legal and regulatory obligations, the complaints policy, the business practices promote the fair treatment of the consumer and how to submit a claim and the deadline for doing so.
They will need to regularly assess the knowledge of employees of dealerships, particularly before commencing the activities of distribution of products and when a change is made to the product or the legislative framework.
Finally, insurers will have to ensure that the staff assigned to the supervision of the compliance is independent of the one who makes the tracking of sales, that it does not receive any variable compensation in connection with the sale of insurance products to dealers that it oversees and that are put in place indicators that help to identify bad business practices.