Private vehicles unknowingly left uninsured on motor dealer floors

Peter Atkinson, National Technical Portfolio Manager at the Financial Intermediaries Association of Southern African (FIA)

An increasing number of consumers have discovered that their vehicles are not covered by their insurance policy when left with motor dealers to be sold on their behalf, leaving them exposed to huge financial loss should the vehicle be damaged or stolen.

This is according to Peter Atkinson, National Technical Portfolio Manager at the Financial Intermediaries Association of Southern African (FIA), who says most private motor insurance policies exclude cover if the vehicle is involved in an accident whilst being kept at a motor dealership for purposes other than maintenance or repair.

“Most consumers assume that their insurance policy will provide comprehensive cover regardless of where their vehicle is being kept. However, an insurance policy is drawn up according to the specific risk factors associated with that vehicle – such as physical security measures at the insured’s premises, where the car is stored when not in use, as well as the age and experience of the named driver.”

“These are the factors that are taken into account at the underwriting stage, which determines the type of cover that is required and the total premium that needs to be paid.”

Atkinson notes that once a vehicle is placed in the possession of a motor dealer, the original risk factors no longer apply and the insurer has no way of knowing who will be driving the car or where it will be stored. “As a result, the premium currently being offered on the vehicle may no longer be appropriate and if the insurer is not informed of the change in circumstances they may decide not to meet a claim.”

“The fact is that many insurers are unwilling to extend cover under a personal lines policy if the asset is effectively no longer under the control of the insured. However, they may be willing to grant an extension for a given period, provided they are satisfied that the dealer has suitable precautions and processes in place to provide adequate risk protection.”

Atkinson says many reputable dealerships do have external insurance cover to protect their own vehicles on the showroom floor from theft, loss or damage. “However, because the private vehicle is not the property of the dealership it is usually referred to as ‘consignment stock’ which is typically not covered by standard motor dealerships policies, as the insurer will not classify it as actual stock in trade. Cover may also be in place for fire and burglary but not accident.”

“Consumers looking to sell their motor vehicles on dealership floors should approach their insurance companies beforehand to ascertain the appropriate procedures to be followed to avoid any difficulties during the claims process, should the worst happen,” concludes Atkinson.