Mila and Eric bought a car from a car yard. The car dealer arranged the finance to pay for the car through a finance company, but Mila and Eric paid for mechanical breakdown insurance, costing $1,600, in full directly to the car dealer. The car dealer paid the mechanical breakdown insurance premium to the finance company, and the insurer should have direct debited the finance company’s bank account. The insurer did not direct debit the finance company’s account, so the policy was not paid for and the insurer cancelled the policy.
Mila and Eric were unaware the policy had been cancelled, and even had a letter from the insurer confirming they had cover.
When Mila and Eric’s car broke down, they made a claim to the insurer, but the insurer said the policy had been cancelled by the finance company the day after the policy was purchased. Mila and Eric had no option but to pay the mechanic the $1,400 it cost to repair the car.
Mila and Eric complained to the finance company who said it was the insurer’s fault but agreed to reimburse them $800, being half of the cost of the insurance. Mila and Eric wanted the full cost of the insurance reimbursed and complained to FSCL. Mila and Eric also said it had been stressful and inconvenient to discover that they did not have the insurance they believed was in place and asked the finance company to pay them compensation of $500.
We referred the complaint to the finance company’s internal complaints process. The finance company reluctantly agreed to pay Mila and Eric the full cost of the insurance premium ($1600) but did not agree that they were responsible for Mila and Eric’s stress and inconvenience, saying it was the insurer’s fault for not debiting the finance company’s bank account.
The finance company declined to pay Mila and Eric $500 as compensation for inconvenience, so Mila and Eric complained to FSCL.
Dispute
Mila and Eric said they had been in touch with the insurer, who had explained the policy had been cancelled by the finance company the day after they had issued the certificate of insurance. Mila and Eric accepted the insurer’s explanation and said that, although they had their money back now, the process had been stressful and inconvenient. They had had to pay for car repairs when they thought they had insurance in place and now no longer had cover.
The finance company said it was the insurer’s fault that Mila and Eric no longer had insurance cover because the insurer had not direct debited their account for the premiums. The finance company was unaware the insurance had not been paid for and said they could not have known the policy had been cancelled.
The finance company also provided an email exchange between them, the car dealer, and the finance company. It appeared there had been a delay in the car dealer transferring payment to the finance company and there was an email from the insurer to the finance company cancelling the policy the day before the insurer issued the certificate of insurance.
Review
From the information available to us it was difficult to establish where the fault lay, but we spoke to the finance company and asked whether, in the interests of resolving the complaint quickly, they would be prepared to pay Mila and Eric the $500 they had asked for. We also asked the finance company why they had not noticed the additional $1,600 in their account that did not belong to them.
Resolution
During our conversation the finance company agreed to pay Mila and Eric $500 as compensation for inconvenience and the complaint was resolved.
Insights for participants
The pragmatic approach of an early resolution can be the best response to a complaint. Mila and Eric were the innocent parties of miscommunication between the finance company and the insurer. Mila and Eric were clear about who they thought was responsible and what would resolve matters for them. Although the finance company might not have been ultimately responsible, the early resolution put matters right for Mila and Eric and saved the finance company unnecessary time and money. The finance company ‘’did the right thing’’ by their customers.
