INSURANCE is one of the most problematic but yet the most profitable sector in the hire-purchase industry in Fiji.
Many consumers who buy their products on credit are unaware that the product is actually insured let alone understanding how insurance works in the hire-purchase industry.
The hire-purchase report reveals that 54 per cent of consumers did not even know that the product they purchased was insured. Of those who were aware that the product was insured, 41 per cent learnt of this only when they had agreed to purchase the product or when repayments started, or when the item was stolen or damaged. As much as 66 per cent of the consumers were not even asked by the seller to pay any insurance.
Of the 34 per cent who were asked to pay insurance, 22 per cent were asked to take additional insurance on the product. 77 per cent of the consumers did not know how much insurance they paid for the product.
For the two largest HP companies in the country, none provide any written document on the terms of the 'insurance', or the 'insurance policy'. Hence, not only the consumer but the HP salespersons are unaware of how the insurance works. Take a look at the case study below.
Case Study
Mrs Levuka purchased some furniture from a HP dealer in 2008. A year later, she passed away.
Not knowing what to do, Mrs Levuka's husband went to the HP dealer to inform that his wife had passed away and enquired what he was required to do with the furniture his late wife had purchased.
The dealer informed him that he would have to continue with the payments.
The consumer's husband advised the dealer that he did not sign any agreement with the company, and that he was ready to return the items instead of making further payments on them.
The dealer insisted he continue with his late wife's payments without providing him appropriate information under the law. The husband sought the assistance of the Consumer Council of Fiji. Upon consultation with the company, the council was advised that the Consumer Credit Act 1999 had a provision which required the next of kin to continue with payments in the event of passing away of an account holder.
The payments have to continue until the account is paid off.
The council did not agree with the advice given by the dealer and consulted the director of the company who informed that Mrs Levuka's husband would not need to continue with any payments since the items were covered by insurance.
The director apologised for the misinformation the company's Finance Manager had provided and agreed to train all his staff on this matter.
HP Approaches
The two major HP dealers have divergent approaches to insurance of the product where one uses the term insurance and the other does not.
The market follower, MH's Homemaker provides insurance on all its products while the market leader Courts have options stating that there is no compulsory insurance for goods under any of the hire-purchase options.
MH's Homemaker levies an insurance charge separately from the credit charge on all goods sold under HP. It charges for the Queensland Insurance Company 3.5 per cent per annum of costs of general goods; 5 per cent per annum for computers, and 5.5 per cent per annum for generators, outboard engines, car stereos, air compressors, video cameras, and fastfones.
Council Advice
We urge consumers to find out the insurance cost and understand the insurance component of the hire-purchase first before committing to it. If you are not advised or informed by the salesperson appropriately, then you must demand for clarifications before you sign up the hire-purchase contract.
Next week: We look at insurance disclosure and consumer gain.
* This is a weekly contribution by the Consumer Council of Fiji.