Following some recent comments by members, it appears that auto dealers are exploiting the provisional confirmations of automobile insurance you provide to policyholders when they purchase a vehicle, particularly in light of the fact that these documents often indicate the premium amount for the coverage selected.

Since finance and insurance managers know how much the premium is, they could tell clients they are paying too much for their insurance. They could also use this argument to convince the client to take out auto insurance through the dealership or they could offer to "shop around" for the client (which they are actually prohibited from doing).

We checked whether brokers are required to indicate the insurance premium amounts for the provisional coverage. The following response was provided by attorney André Bois:

"It's advisable here to make a distinction between two things: firstly, the coverage document or provisional confirmation of insurance that the broker gives the client prior to the issuance of the policy and secondly, the confirmation of insurance coverage required by the company financing the transaction or serving as the long-term lessor. In this case, we are dealing with the latter situation. In this regard, brokers are not required to report to auto dealers; all they are required to do is confirm that insurance coverage is in place protecting the interests of the lender or long-term lessor in the event of a claim.

As we know, finance and insurance managers are acting on behalf of the lender or long-term lessor when they require a confirmation of insurance. However, the lender or long-term lessor – a subsidiary of the auto manufacturer – has no legitimate interest in requiring the disclosure of the premium amount. All that is required is confirmation that insurance coverage is in place under which the lender or long-term lessor's interests are duly protected, in particular by adding the lender or lessor's name as an additional insured.

Nevertheless, brokers are required to inform the policyholder not only about the coverage in place, but also about the cost thereof. The fact remains that brokers do not have a similar professional obligation with respect to third parties whose sole interest is limited to obtaining confirmation that insurance coverage is in place commensurate with the amount of their receivable (in the case of a loan) or with the value of the vehicle (in the case of a long-term lease)."

Therefore, when sending confirmation of coverage (either to the financing company or directly to the dealership), you are not required to indicate the premium amount.

If you have any questions, please feel free to contact us.