Vehicle Original Equipment Manufacturers (OEMs) and third party providers of vehicle protection products in Alberta may be quickly aligning with insurance company underwriters of these products, following the Alberta auto insurance regulator’s latest guidance on auto insurance rate filings.
The Automobile Insurance Rate Board (AIRB) introduced auto insurance rate filing guidelines on Jan. 9, 2025. The guidance follows recent bulletins from Alberta’s Superintendent of Insurance and the Alberta Insurance Council (AIC), which define vehicle warranty contracts, dealership loyalty programs, and ancillary vehicle protection products as ‘insurance,’ meaning these products must have approved policy wordings and rating programs.
“Note that the AIC has not included a transition period for compliance and has stated that the AIC will investigate complaints, which could result in fines of up to $200,000 and other disciplinary measures,” Darcy Ammerman, Mathurhaen Siri, and Marie Liang of the business law firm McMillan wrote in a Jan. 17 blog published on Mondaq.
“As such, OEMs and third-party providers are left scrambling to either pull non-compliant products from the market (such as anti-theft, windshield replacement, and non-manufacturer tire and rim replacement), or to urgently partner with an insurer to underwrite them,” the authors write.
“From a dealer perspective, it would be ideal to partner with an insurer who already has an established rating program that allows for pricing variations, so that they may continue their practice of marking-up the contract price as they see fit, or at least within the limits established by the OEM or third-party administrator.”
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Alberta’s regulatory regime gives examples of “ancillary vehicle protection programs,” including, among other things:
- deductible reimbursement and/or monetary credits given in the event of loss, damage or theft of a motor vehicle;
- non-manufacturer tire and rim warranties providing for tire and rim replacement (does not include warranties provided by the OEM for tires and rims it included in the vehicle’s assembly);
- glass protection products promising to pay some or all of the cost of a windshield replacement; and
- anti-theft products promising to make a payment in the event of theft and/or non-recovery of the motor vehicle or any part thereof (includes etching/tagging and catalytic converter anti-theft devices that include a promise to pay if the product fails).
In a separate blog, Ammerman and Siri note Alberta has a carve-out for “roadside service plans that provide for minor repairs for reasonable and expected wear and tear routine to the ownership of a motor vehicle from the gambit of insurance.
“Examples include scuff, ding, chip, cut, tear, and scratch repairs (interior or exterior), windshield repairs, tire and rim repairs, oil changes, wiper blade replacement and air filter replacement.”
This carve-out is not found in similar guidance issued recently by B.C.’s financial services regulator.
“Faced with the interpretations set out in the Bulletins, OEMs, dealers and third-party providers should carefully review their programs to ensure compliance,” Ammerman and Siri write in an earlier blog published on McMillan’s website on Jan. 7, 2025.
“For products that are considered insurance, providers are faced with the difficult decision of whether to modify or pull ‘offending’ motor vehicle protection products from the market, or to engage with an insurer authorized to conduct insurance business in Alberta to underwrite the contracts.”
Feature article courtesy of iStock.com/skynesher
