Finance company assumes customer’s identity

Purchasing the ute and insurance

Hemi purchased a new ute for $20,995 with insurance and warranties, and after trading in his old ute, he borrowed $22,816.40 from a finance company. As well as insuring the ute, Hemi had purchased Guaranteed Asset Protection insurance (GAP) that would cover him if the ute was written off, and there was a discrepancy between the amount he owed the finance company and the amount the insurance company agreed to pay. Hemi paid for all the insurance, in advance, to cover him for two years.

The accident and claim

A little over a year later, while driving to work one morning along a country road, Hemi collided with a cow, writing off his ute. The insurer accepted Hemi’s claim and offered Hemi $17,125 as compensation his loss. The insurer said it spoke to Hemi’s partner, Rita, and she accepted the offer. Hemi agreed the insurer spoke to Rita, but did not agree she accepted the $17,125 offered. In any event, Hemi said he owned the ute and insurance and the insurer should have been speaking to him.

Compensation accepted

The insurer sent a settlement agreement, made out in Hemi’s name to the finance company. The finance company signed a settlement agreement, purporting to be Hemi, accepting $17,125 in full and final settlement of Hemi’s claim. The insurer paid the $17,125 directly to the finance company, leaving Hemi $437.46 owing to the finance company.

The finance company said it was standard practice to accept an insurer’s offer for a vehicle that is written off, where money is still owed on the vehicle.

The finance company’s diary notes record that it gave Hemi and Rita information about how to claim against the GAP insurance, but neither Hemi nor Rita made a claim. Hemi’s loan repayments continued, and he quickly repaid the loan.

A month later the insurer paid Hemi a premium refund of $970.52 for all the insurance he had paid in advance.

Hemi’s view

Hemi complained to FSCL about the finance company’s actions.

Hemi saidthat when the finance company signed the settlement agreement with the insurer it purported to be him. Hemi said he did not accept the $17,125 offered by the insurer and would not have signed the settlement agreement. Hemi considered his ute was worth close to $30,000 and the finance company had caused him a loss by accepting only $17,125.


We agreed the finance company should not have signed the settlement agreement purporting to be Hemi, however we did not consider the finance company’s actions had caused Hemi a significant loss.

The finance company was able to provide information from the insurer that it had obtained two valuations of Hemi’s ute, determining the value to be $18,000. Given Hemi had purchased the ute a little over a year earlier for $20,995 the valuation of $18,000 was plausible. After deducting the $500 policy excess, the $17,125 offered did not seem to be so unreasonable.

We explained to Hemi that when a finance company has an interest in a vehicle as security for a loan, it is usual for the insurer to pay compensation directly to the finance company. Although Hemi continued to repay the loan, when he could have made a claim under his GAP insurance, the finance company had given him information about how to lodge a claim. We also noted that the insurer had refunded the $920.52 insurance premium paid in advance.


We discussed a resolution of the complaint with the finance company, and the finance company agreed to offer Hemi $375, as a gesture of goodwill, being the difference between $17,125 and the $17,500 Hemi could have reasonably expected to receive for the ute based on the valuation of $18,000. Hemi accepted the finance company’s offer and the complaint was resolved on this basis.

Key insight for participants

We were pleased to see this complaint resolved, but expressed our concern to the finance company that it had signed a settlement agreement purporting to be the insured. We suggested the finance company review its practice and, if asked to sign a settlement agreement by an insurer in the future, it should make its identity clear and let the borrower know that it is accepting the insurer’s offer.