Replacement insurance: AMF begins penalizing auto dealers found to be breaking the law

LONGUEUIL, QC, Feb. 16, 2015 /CNW Telbec/ - Quebec's Autorité des marchés financiers (AMF) announced today that it would be imposing fines on nine auto dealers found to have been engaging in illegal practices to the detriment of consumers. In the view of the Regroupement des cabinets de courtage d'assurance du Québec (RCCAQ), this decision marks a new step in the fight to end these practices, which are harmful not only to consumers, but also to the industry itself.

The AMF is indeed starting to penalize auto dealers who, by means of illegal business practices, have been breaking the law and abusing consumers' trust. For the time being, fines have been imposed on a total of nine dealers.

RCCAQ's efforts have paid off

The RCCAQ is proud to note that its efforts to denounce these illegal business practices to the AMF have paid off. "We have been working to denounce these illegal practices for nearly three years now. This first wave of penalties confirms the validity of our initiatives aimed at ensuring strict enforcement of the law," said RCCAQ chair Vincent Gaudreau, who also paid tribute to the AMF's rigorous investigative work in this regard.

A look back at abusive practices

The RCCAQ has long called for penalties in response to the illegal practices of certain auto dealers who, among other things, have forced consumers to purchase a specific insurance product in order to obtain financing. Furthermore, if customers are not extremely vigilant prior to signing the sales contract, they may end up having to replace their vehicle at the same dealership. That is what happens to nearly 90% of consumers who are unaware that they are actually free to do so at other locations. 

Some distributors are also engaging in activities that are actually reserved for certified professionals, such as insurance brokers. It should be noted that auto dealers are not authorized to collect personal information from customers when providing an insurance quote, nor are they authorized to offer insurance advice.

Brokers keep their clients informed

Needless to say, brokers ensure that their clients receive all the advice they need to make a wise choice. They also remind their clients that when purchasing a new vehicle, there are only two options that provide coverage in the event of a total or partial loss of the vehicle: replacement insurance or the replacement value endorsement. Replacement insurance (FPQ no. 5) is a form of supplementary coverage, while the replacement value endorsement (43 A-E) is an option included in the auto insurance policy (FPQ no. 1).

Both of these products, which are broadly comparable, are available from insurance brokers; brokers have the expertise to explain the advantages of each. However, only replacement insurance is available from auto dealers because they are legally prohibited from selling auto insurance (FPQ no. 1), advising customers on the types of coverage offered by such a policy or even comparing both products.

Brokers also seek to inform their clients that replacement insurance costs less. In addition, clients have the freedom to do business with whichever dealer they choose.

Consumers' interests take precedence

Although the RCCAQ welcomes the initial steps taken by the AMF, it does not intend to stop there. "We are aware that the decision to impose fines on abusive dealers will have a positive impact, although this does not actually close the matter," said Mr. Gaudreau. "Our role as brokers involves serving our clients and defending their interests. That's why we are determined to keep pursuing our efforts until this situation has been eradicated completely—a situation that is harmful not only for consumers, but also for the industry."

About the RCCAQ

The RCCAQ is a professional association that seeks to promote and defend the socio-economic interests of its member firms. It represents some 4,200 brokers working in 600 firms and branch offices around the province.


SOURCE Regroupement des cabinets de courtage d'assurance du Québec

For further information: Nadine Bourgeois, (514) 773-6258,


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