What is the is the difference between mechanical insurance policy underwritten and administered by an insurance company

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Customer: what is the is the difference between mechanical insurance policy underwritten and administered by an insurance company where a premium is paid by the purchaser and where an excess applies to each and every claim v's an extended warranty contract administered by the selling dealer where there would be no excess to apply to any claims and secondly would the consumer regulators misconstrude this as a type of insurance policy ?
JA: Because consumer protection law varies from place to place, can you tell me what state this is in?
Customer: new zealand
JA: Have you contacted the seller or manufacturer?
Customer: The situation is that I am going through the process of developing a vehicle service plan/extended warranty contract for selling dealers in New Zealand to help their customers as this type of extended warranty contract that the dealers could provide where this contract would take care of warrant of fitness checks and regular mechanical services throughout the duration of the contract these as this is where most insurance policies will not pay any claims where the purchaser has not paid for and kept up regular servicing of their vehicle vehicles are too old to have manufacturers warranties
JA: Anything else you want the Lawyer to know before I connect you?
Customer: are these legal advisors in NZ ?
Answered by Chris The Lawyer in 3 hours 1 year ago
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Chris The Lawyer
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Chris The Lawyer, Expert

Hi
I am a New Zealand lawyer based in Wellington and will help you with your question today. Please give me a minute to read your question
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Chris The Lawyer, Expert

Much of what your proposal covers is covered by the Consuler Guarantees Act. But the issue is whether what you are designing is an insurance policy.
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Chris The Lawyer, Expert

I will look at you description and advise my views
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Chris The Lawyer, Expert

The best definition is from the Insurance (Prudntial Supervision) Act which says

Section 7 Meaning of contract of insurance

(1) For the purposes of this Act, unless the context otherwise requires, contract of insurance—

(a) means a contract involving the transference of risk and under which a person (the insurer) agrees, in return for a premium, to pay to or for the account of another person (the policyholder) a sum of money or its equivalent, whether by way of indemnity or otherwise, on the happening of 1 or more uncertain events; and

(b) includes a contract of reinsurance.

(2) In this section, uncertain event means an event—

(a) with respect to which there is (from the perspective of the policyholder) an element of uncertainty as to when or whether it will take place; and

(b) that is beyond the insurer’s control.

(3) However, a contract, to the extent that it provides for, or relates to, any of the following is not a contract of insurance for the purposes of this Act:

(a) a derivative transaction:

(b) a guarantee under which a person agrees to answer to another person for the debt, default, or liability of a third person:

(c) a repayment waiver (within the meaning of section 5 of the Credit Contracts and Consumer Finance Act 2003):

(d) a product or service guarantee or warranty in relation to any goods or services that is given or made by the manufacturer or supplier:

(e) any lump sum, annuity, pension, allowance, refund, or other payment arising from membership of a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2013):

(f) gambling (within the meaning of section 4(1) of the Gambling Act 2003):

(g) a call-out service that involves providing assistance in respect of a motor vehicle (within the meaning of section 2(1) of the Land Transport Act 1998) that cannot be operated (for example, because it has broken down, has run out of fuel, or has a flat tyre, or because the owner or operator is locked out), being a service that is not provided when the motor vehicle is involved in a motor vehicle accident, is stolen, or is damaged owing to theft or vandalism:

(h) any other transaction or matter of a class declared by regulations to be transactions or matters that are not by way of insurance.

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Chris The Lawyer, Expert

If your scheme falls into Section 7(3)(d) it may not be insurance

Customer
Hi Chris Thanks for your explanation but does not clarify my understanding I need to be very confident that what I am trying to develop will not be under the legislation be or act like an insurance policy as I do not have an insurance license or an underwriter with an insurance license in NZ
The product I am wanting to develop is where a selling automotive dealer can provide this product in the form of a vehicle service plan / extended warranty contract for a cost to the purchaser at the time of sale of the vehicle where the contract would pay the cost of an annual warrant of fitness check plus an annual service on the vehicle and should the vehicle breakdown this service plan /extended warranty contract would also pay for towing and the parts and labour to repair the actual breakdown
Where there is a repair paid for under the contract there would be no excess that would apply as would normally apply with an insurance policy contract
So my question is what actual contract wording would be needed to make certain that this contract could not be misconstruded at as a type of insurance policy by our consumer regulators
regards ***** *****
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Chris The Lawyer, Expert

Essentially you are trying to create a contract which says to the car buyer that they will be covered for WOF, service costs, breakdown and repairs. That is a situation where the buyer is entering a contract to transfer some risk, which then does make it insurance. It is uncertain what will be needed for the WOF each time it is due, and similarly for the service. This means there must be a transfer of risk to the dealer.

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