The Ombudsman for Short-Term Insurance is concerned by the number of complaints received from consumers relating to motor vehicle warranty contracts

Brian Martin, the Ombudsman for Short-Term Insurance

The Ombudsman for Short-term Insurance is disturbed by the number of complaints received from consumers in relation to motor vehicle warranty contracts which are purchased from dealers at the time of purchase of the motor vehicle, or when a manufacturer’s warranty on the vehicle is due to expire.

These products are marketed as being insurance policies administered by “insurance administrators” and have all the hallmarks of an insurance policy. Later on when a “claim” is rejected by the “insurance administrator” consumers may be advised, that if they are unhappy with the decision of the administrator, to seek assistance from the Ombudsman. However, when the Ombudsman receives a complaint and investigates the matter it frequently transpires that the product sold to the consumer was not an insurance policy underwritten by a registered insurer, but is in fact nothing more than a contractual arrangement concluded between the consumer and the dealer concerned. The consumer is thereafter left high and dry in relation to any recourse against the dealer as the dealer is not a registered insurer and consequently falls outside of the jurisdiction of the Ombudsman for Short-Term Insurance.

When such complaints are in turn referred to the Motor Industry Ombudsman that Ombudsman declines to intervene on the basis that he deals with complaints relating to motor vehicles and not financial services products.

The Ombudsman has referred the matter to the Financial Services Board, as the regulator, for consideration, but in the meantime consumers are urged to exercise great caution in the purchase of such products and in particular to enquire, at the time of purchase, whether the product offered is an underwritten insurance policy. If the product offered is nothing more than a contract with a dealer, consumers’ attention is drawn to the fact that in the event of any dispute or complaint, they will be left with no recourse against the dealer other than through the legal process, which is extremely costly and time consuming to pursue. The dealer may also prove to be of dubious standing.

Consumers are encouraged to fully acquaint themselves with the nature of the benefits provided by such contracts and to carefully consider whether the product offered covers the consumers’ needs. “Ask questions regarding the product and in particular whether it is underwritten by a registered insurer”, says Brian Martin, the Ombudsman for Short-Term Insurance. If a product is held out as being an insurance policy make sure that it is underwritten by a registered short-term insurer. Consumers can check if an insurance company is registered by contacting the Financial Services Board on 012 428-8000.