Victoria, British Columbia — The British Columbia Financial Services Authority (BCFSA) has issued a Regulatory Statement to respecify what is considered a service contract versus insurance contract in the province.
The Regulatory Statement is specifically titled as “Product Warranty, Vehicle Warranty, and Automobile Insurance,” and according to the new policy, under the statement, contracts that were previously viewed as falling under the service category—such as dent repair and windshield repair or replacement—will now be considered to be automotive insurance. Thus, these services cannot be sold or underwritten without insurance licensing.
MacMillan further notes that this change “is in stark contrast to contracts that respond to mechanical failure, such as vehicle warranty insurance, for which there is an insurance licensing exemption for manufacturers, retailers—including motor vehicle dealerships—and their employees. The rationale behind this exemption is that OEMs have direct control over product design and specifications and should be allowed to ‘stand behind’ their products.”
As a result, impacts under the new regulations would include administrators and third party providers of service contracts in the province “left to make the difficult decision of whether to pull their service contracts off the shelves, or to engage with an insurer authorized to conduct insurance business in B.C., to underwrite their service contracts,” says MacMillan.
Alongside this, those selling service contracts within dealerships will now also be required to have insurance agent licensing.
MacMillan stresses that “although the BCFSA has signalled its willingness to work with the industry on an orderly transition, it is important to keep in mind that there is no transition period specifically set out in the Regulatory Statement, and that the BCFSA has the authority to issue ‘cease and desist’ orders and penalties for failure to comply.”
Any questions regarding this Regulatory Statement can be answered by contacting the BCFSA Market Conduct department at insurance@bcfsa.ca
To read the Regulatory Statement, see below.
product-warranty-vehicle-warranty-and-automobile-insurance
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