VSA BULLETIN
April 29, 2009
Issue #8 - 2009

Unlicensed insurance selling: FICOM halts sales of ETCHING

A "cease and desist" order issued by British Columbia's Financial Institutions Commission (FICOM) against Penticton Honda, could impact 228 dealerships in the province that are currently selling a so-called "etching" program.

The ruling by the Superintendent of Financial Institutions (see http://www.fic.gov.bc.ca/pdf/enforcement/trust/fia20090407.pdf) is that the program is "auto insurance." Effectively, this means that if motor dealers sell this product, they must be licensed as insurance brokers and have licensed insurance agents dealing with their customers.  The Alberta based companies offering the ETCH program are not authorized by FICOM to sell it in B.C. and have been ordered to stop.

The Penticton Honda ruling was issued on April 7, 2009 citing that the Platinum Security Protection Program offered through First Protection Security Products (FPSP), a division of Data Gathering Service Inc. (DGSI),was automobile insurance, since the product insures against loss of or damage to an automobile, and the loss of use of it. Although the underwriter, Millennium Insurance Corporation (MIC), was licensed in B.C., the Superintendent was concerned it was not authorized to offer this particular insurance program.

The Superintendent found that FPSP, DGSI and Penticton Honda were not licensed by FICOM or the B.C. Insurance Council to conduct insurance business in British Columbia. Also, the motor dealer’s salespeople were not registered insurance agents as required by B.C. law.

An effect of this decision is that, as ETCH is an insurance product, a consumer must be given the choice to purchase the insurance or to decline it. The Superintendent noted that the dealer charged the etching fee as part of its administrative/security fee and the consumer really had no choice but to pay for it:

“While it appears numerous dealerships are selling these policies in British Columbia, Penticton Honda’s forced sale of this product is particularly egregious and warrants specific remedial regulatory prohibition.”

FPSP and DGSI have been ordered to cease and desist conducting insurance business in B.C. and MIC has been ordered to cover existing sold policies.

Reporting FICOM's action to B.C. motor dealers, VSA Deputy Registrar Ian Christman said:

 "While the order is specific to Penticton Honda, motor dealers who do not meet the requirements noted in the Superintendent's decision may not sell the program. The Superintendent's decision also indicates that a motor dealer cannot require a consumer to purchase the above insurance program, such as being part of an administrative fee, including it in a Pro Pack or by building it into the price of the motor vehicle. If a motor dealer continues to sell the above noted program contrary to B.C. law, they may face regulatory action by FICOM and by the VSA."

Consumers with claims for policies already sold should be referred to the MIC company noted.

www.vehiclesalesauthority.com

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