Can the bank which is financing your car impose an insurance policy on you, and debit your bank account for it?
The short answer is yes.
Those who’ve bought a new, financed car will know that the financing bank won’t allow you to drive the car out of the dealership without first having insurance in place.
That’s because the bank is the title holder and therefore has “an insurable interest” in that asset, and to make sure that the policy hasn’t been cancelled by the client down the line, the banks often contact them and ask for proof that the policy is still in place.
And what if that proof isn’t forthcoming from the client?
Well, says SA Insurance Association chief executive Viviene Pearson, the bank is entitled to impose an insurance policy on the client, but only with their permission, and only after full disclosure about the policy’s terms, conditions and monthly premium.
“The client must be provided with a quotation; they must consent to both the insurance and the debit order, and they must be sent the policy document after they’ve agreed to the cover,” Pearson said.
Contrast that with what happened to Nicole Sharratt of Durban.
She was contacted by Absa at the end of August, first by phone and then via SMS, and asked to e-mail proof of insurance on her Absa-financed car within 14 days, failing which they would “automatically insure me”.
The same day she e-mailed the proof to the address provided, with her ID number in the subject line.
About six weeks later, on October 5, she got another SMS, saying the bank hadn’t received her proof of insurance.
“I thought that must be a mistake, or perhaps they hadn’t captured it yet, so I did nothing about it,” she said.
Then at the end of October, she got another SMS, again asking her for proof of insurance.
“I phoned them that morning to ask why I kept getting those messages. The woman I spoke to checked on the system, said they hadn’t received my e-mail, and told me to forward the proof to her personal work e-mail, and she would sort it out.”
Sharratt did that immediately, but on November 1 her Absa debit order was almost R645 more than usual.
When she phoned the woman she’d dealt with a few days earlier, she was told the extra amount was for an insurance policy, because it had already been processed by the time they received her proof of insurance.
(Absa has an insurance division.)
And in order to get her money back, she’d have to speak to the bank’s vehicle and asset finance people.
Note how there was no suggestion that she could handle that for Sharratt as a customer service.
That’s when I took on the case.
Almost immediately Sharratt got a written apology and a refund of that premium.
But I wanted to know, among other things, why she wasn’t told when her account would be debited, or anything about the policy and its premium, and how they could have assessed her risk without asking her about her use of the car and where she parked it at night.
Responding, Nelisiwe Baloyi, who heads Absa’s vehicle financing division, said the bank’s contact centre, which manages the policy confirmation process for the vehicle finance division, “experienced intermittent downtime on their inbound mail servers” during September, and as a result, 10 customers who had sent proof of their insurance policies, acquired Absa Insurance policies anyway, and were force-debited from them, because their e-mails weren’t received. All have since been refunded.
“A system fix has been deployed to prevent occurrences of this nature in the future,” Baloyi said.
As for the unilateral way that the policy was imposed, Baloyi supplied a detailed break-down of the bank’s policy on this, including contacting the client multiple times in multiple ways before imposing the insurance policy, and then sending them an SMS when it was loaded.
What’s missing is providing the client with a quotation and getting their consent.
Sharratt got no prior notification that the policy had been loaded in her name, much less an opportunity to examine its terms and cost.
A poor show all round.
As for risk underwriting, Baloyi said the bank used “age and gender information as well as type of vehicle, market value and outstanding capital” to underwrite risk.
On average, 2.2% of the bank’s car finance clients had insurance policies imposed on them annually, after failing to supply proof of their own, Baloyi said.
They are entitled to do so, but clearly it needs to be done in a more transparent, inclusive way.
Danger of debit order dispute
Right now more than the usual number of Absa’s car finance clients are cancelling their insurance policy or taking “non comprehensive” policies, leaving them “in a compromised position” should their cars be damaged or stolen, said Nelisiwe Baloyi, who heads Absa’s vehicle financing division.
And that’s not all.
“Absa has also noted an increase in consumers unjustly disputing debit orders when they are short of cash or run into financial difficulties,” Baloyi said.
And that could have disastrous consequences.
“They run the risk of losing out on insurance policy pay-outs when they claim, due to inconsistent payment history.”
CONTACT WENDY:
E-mail: consumer@knowler.co.za
Twitter: @wendyknowler
Don’t bank on smooth ride with car insurance
The short answer is yes.
Those who’ve bought a new, financed car will know that the financing bank won’t allow you to drive the car out of the dealership without first having insurance in place.
That’s because the bank is the title holder and therefore has “an insurable interest” in that asset, and to make sure that the policy hasn’t been cancelled by the client down the line, the banks often contact them and ask for proof that the policy is still in place.
And what if that proof isn’t forthcoming from the client?
Well, says SA Insurance Association chief executive Viviene Pearson, the bank is entitled to impose an insurance policy on the client, but only with their permission, and only after full disclosure about the policy’s terms, conditions and monthly premium.
“The client must be provided with a quotation; they must consent to both the insurance and the debit order, and they must be sent the policy document after they’ve agreed to the cover,” Pearson said.
Contrast that with what happened to Nicole Sharratt of Durban.
She was contacted by Absa at the end of August, first by phone and then via SMS, and asked to e-mail proof of insurance on her Absa-financed car within 14 days, failing which they would “automatically insure me”.
The same day she e-mailed the proof to the address provided, with her ID number in the subject line.
About six weeks later, on October 5, she got another SMS, saying the bank hadn’t received her proof of insurance.
“I thought that must be a mistake, or perhaps they hadn’t captured it yet, so I did nothing about it,” she said.
Then at the end of October, she got another SMS, again asking her for proof of insurance.
“I phoned them that morning to ask why I kept getting those messages. The woman I spoke to checked on the system, said they hadn’t received my e-mail, and told me to forward the proof to her personal work e-mail, and she would sort it out.”
Sharratt did that immediately, but on November 1 her Absa debit order was almost R645 more than usual.
When she phoned the woman she’d dealt with a few days earlier, she was told the extra amount was for an insurance policy, because it had already been processed by the time they received her proof of insurance.
(Absa has an insurance division.)
And in order to get her money back, she’d have to speak to the bank’s vehicle and asset finance people.
Note how there was no suggestion that she could handle that for Sharratt as a customer service.
That’s when I took on the case.
Almost immediately Sharratt got a written apology and a refund of that premium.
But I wanted to know, among other things, why she wasn’t told when her account would be debited, or anything about the policy and its premium, and how they could have assessed her risk without asking her about her use of the car and where she parked it at night.
Responding, Nelisiwe Baloyi, who heads Absa’s vehicle financing division, said the bank’s contact centre, which manages the policy confirmation process for the vehicle finance division, “experienced intermittent downtime on their inbound mail servers” during September, and as a result, 10 customers who had sent proof of their insurance policies, acquired Absa Insurance policies anyway, and were force-debited from them, because their e-mails weren’t received. All have since been refunded.
“A system fix has been deployed to prevent occurrences of this nature in the future,” Baloyi said.
As for the unilateral way that the policy was imposed, Baloyi supplied a detailed break-down of the bank’s policy on this, including contacting the client multiple times in multiple ways before imposing the insurance policy, and then sending them an SMS when it was loaded.
What’s missing is providing the client with a quotation and getting their consent.
Sharratt got no prior notification that the policy had been loaded in her name, much less an opportunity to examine its terms and cost.
A poor show all round.
As for risk underwriting, Baloyi said the bank used “age and gender information as well as type of vehicle, market value and outstanding capital” to underwrite risk.
On average, 2.2% of the bank’s car finance clients had insurance policies imposed on them annually, after failing to supply proof of their own, Baloyi said.
They are entitled to do so, but clearly it needs to be done in a more transparent, inclusive way.
Danger of debit order dispute
Right now more than the usual number of Absa’s car finance clients are cancelling their insurance policy or taking “non comprehensive” policies, leaving them “in a compromised position” should their cars be damaged or stolen, said Nelisiwe Baloyi, who heads Absa’s vehicle financing division.
And that’s not all.
“Absa has also noted an increase in consumers unjustly disputing debit orders when they are short of cash or run into financial difficulties,” Baloyi said.
And that could have disastrous consequences.
“They run the risk of losing out on insurance policy pay-outs when they claim, due to inconsistent payment history.”
CONTACT WENDY:
E-mail: consumer@knowler.co.za
Twitter: @wendyknowler
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