Much better enforcement of existing laws and regulations is required to protect consumers from mis-selling of motor vehicle add-on insurance products says the Insurance Council of New ZealandTe Kāhui Inihua o Aotearoa (ICNZ).
“Vehicle insurance products, such as mechanical breakdown, and car loan related ones, such as repayment and gap protection, typically provide cover that people later rely on to avoid massive liabilities,” says ICNZ Chief Executive, Tim Grafton. “The Fair Trading, Credit Contracts and Consumer Finance Acts are in place to protect people against being sold financial products that are inappropriate or that they can’t afford. These laws need to be enforced.”
Breakdown cover is there in case of major mechanical problems outside of that which should be prevented by proper maintenance. Loan repayment and gap insurance cover loans taken out for a vehicle. They pay out if regular loan repayments can no longer be made under certain circumstances such as illness or redundancy. Gap cover pays any shortfall between a regular comprehensive car insurance claim for a total loss and any outstanding car loan amount.
“Providers have moved to cap the price at which third parties can sell these products to consumers to provide them with better value. They are also going beyond the statutory five day cooling off period, in which people can receive a full refund if they change their minds, voluntarily extending it to 14 days. This is a better approach than a deferred sales approach as that would lead to few people being protected and higher risks for lenders leading to higher costs for, and lower availability of, loans for borrowers.
“The Commerce Commission looked into this issue last year with a view to protecting consumers. Better enforcement of consumer protection laws and tighter controls over commissions, selling practices and 14-day cooling-off periods will all help keep these insurance products in place for people who would otherwise be left with huge bills to pay in the event of a major breakdown or if they were otherwise no longer able to meet their loan obligations.” says Tim.
ENDS – KA MUTU
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