Automotive News Updates

Risk of service contract regulation looms

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Do these factors of debate trigger you concern? They need to. Although no concrete legislative motion has but resulted from this assembly, there are pink flags waving that we should not ignore.

As longtime trade professionals know, the problem of product classification was addressed in a seemingly passable method with the NAIC Mannequin Act in 1997. Nevertheless, it now seems ripe to be revisited as considerations such because the rise in robocalls and the proliferation of service contracts provided by means of large field shops and different retailers have thrust client safety again into the highlight.

As just lately famous by the Motor Car Safety Merchandise Affiliation, it’s “at all times a harmful dialogue to be discussing retail value and claims prices in a legislative surroundings, as we’ve all seen through the years.”

Change occurs slowly, after all, however listed here are the important thing factors to think about:


  • Service contracts are distinct from insurance coverage and have been carved out from insurance coverage merchandise, although they might be ruled by the Division of the Inside or one other regulatory company.
  • Service contracts are additionally topic to client safety legal guidelines.
  • If classification is revisited, states that don’t presently regulate service contracts as insurance coverage, or in any respect, might accomplish that.
  • As well as, states that already regulate them may accomplish that extra stringently.
  • There’ll possible be a excessive value and elevated pink tape for all concerned.


Let’s overview the worst-case situation: Ought to automobile service contracts be recategorized as insurance coverage, all F&I suppliers and sellers (sellers) would haven’t any selection however to kind licensed insurance coverage corporations. This might require a rigorous licensure course of in addition to licensing necessities in each state.

On the monetary facet, there can be a higher want for capital and surplus. And sellers could also be unable to take part of their merchandise in the identical significant method with out further burden.


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