A recent scathing review of the sale of auto insurance policies in Australia highlighted the value of brokers and the need for regulation in the industry, as it found that consumers were being sold expensive ‘junk’ policies as add-ons by car dealerships.
The three-year review, conducted by the Australian Securities and Investment Commission (ASIC), found “serious problems” in the market resulting from commissions received by the car dealers on the back of policies that did not pay out to consumers.
Insurance Business spoke to experts in auto insurance to find out more about how the Canadian market regulates against these types of sales, and how brokers can mitigate the risks of consumers being sold poor-value policies.
“In Canada, there are many regulations and protection measures put in place to restrict the sale of low-value or junk policies through car dealers,” Colin Simpson, CEO, Insurance Brokers Association of Ontario, said.
The need to be licenced to sell insurance policies in Canada is a strong measure against such sales, and in Ontario, the Financial Services Commission of Ontario (FSCO) must approve any auto insurance product sold in the province – meaning ‘junk’ policies simply aren’t an option, Simpson said.
When it comes to brokers, the Registered Insurance Brokers of Ontario (RIBO) dictates that to maintain a license as a broker in Ontario, your work as a broker must be your only form of employment.
This, Simpson said, is a form of consumer protection which ensures the integrity of brokers. This impartiality means that brokers can provide independent, professional advice, with the insurance needs of the consumer kept top of mind, versus coercive tied-selling in connection to another product like a home or a car.
Barry Haggis, a broker at Young & Haggis Insurance services, told
Insurance Business that the expertise of brokers means that they are always more beneficial to consumers than a salesperson.
“Car dealerships are in the business of selling vehicles and making money, they are not insurance experts like brokers are,” he said. “Brokers care about their clients and will look out for their best interests rather than making a profit for useless coverage,” adding: “You wouldn’t buy home insurance from a real estate agent.”
When it comes to these kinds of issues, Haggis advised that educating consumers on the value of brokers should be the first priority.
“Teach the consumer that they are better off dealing with an expert in insurance to protect their vehicle, and not an expert car salesman looking for a profit,” he said.
Simpson too stressed the value of the brokers’ knowledge to consumers, adding: “Impartial advice, product choice and advocacy in the event of a claim is unarguably the best option for a consumer.”
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