Fake car warranties alarm ombud

Johannesburg - The Ombudsman for Short-Term Insurance is disturbed by the number of false vehicle warranty contracts concluded between dealers and car buyers.

In a statement released on Wednesday, ombud Brian Martin said it frequently transpires that vehicle warranty products sold to the consumer are not underwritten by a registered insurer and are nothing more than a contractual arrangement between the car owner and the dealership.

These products are marketed as insurance policies administered by "insurance administrators" and have all the hallmarks of an insurance policy. Later, when a "claim" is rejected by the so-called insurance administrator, consumers may be advised to turn to the ombudsman if they are unhappy with the administrator's decision.
     
However, if the dealer is not a registered insurer the issue falls outside the ombudsman's jurisdiction.

When such complaints are in turn referred to the Motor Industry Ombudsman, this ombudsman also declines to intervene as he deals with matters relating to motor vehicles, and not financial services products.

The Ombudsman for Short-Term Insurance has referred the matter to the Financial Services Board. In the meantime, consumers are urged to be careful when purchasing a vehicle warranty, and to enquire whether the product offered is an underwritten insurance policy.

If it is nothing more than a contract with a dealer, buyers will be left with no other recourse against the dealer than through the legal process, which is costly and time-consuming. 

"Ask questions regarding the product - and in particular whether it is underwritten by a registered insurer," said Martin.

 - I-Net Bridge