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17-280MR ASIC consults on reforms to add-on insurance sales to drive better outcomes for consumers
ASIC has today released a consultation paper seeking feedback on proposals to reform the sale of add-on insurance and warranties through car dealerships.
The consultation paper proposes:
- A deferred sales model: This will provide consumers with additional time to consider whether they need to buy add-on insurance products or warranties. The proposal is that a period of between four to thirty days must elapse before car dealership intermediaries could sell an add-on insurance product to the consumer.
- Enhanced supervision obligations on insurers over their car dealership sales people: This will introduce specific requirements for insurers to supervise and monitor their authorised representatives selling add-on insurance products.
'Last year we revealed sector-wide failings when it came to the sale of add-on insurance products through car dealerships,' ASIC Deputy Chair Peter Kell said.
'This consultation is about strengthening the regulatory framework so that consumers are not pressured into purchasing insurance they simply do not need or understand. It will also ensure compliance is not an afterthought, as compliance monitoring and supervision by insurers will be strengthened at the point of sale.
'I encourage feedback from all stakeholders on these important reforms.'
ASIC has also announced that it will be undertaking significant data collection from insurers involved in this sector to enable better ongoing assessment of consumer outcomes. For example, ASIC will collect data on claims ratios on add-on products (the amount paid in insurance premiums compared to the amount paid out in claims).
The proposals would apply to all add-on financial products sold in connection with the purchase of a new or used car—with the exception of comprehensive car insurance and compulsory third party insurance.
ASIC welcomes feedback from stakeholders on this consultation paper. Submissions are due by Monday 23 October 2017, and can be sent to firstname.lastname@example.org
In 2016, ASIC released reports reviewing the sale of add-on insurance through car dealers, which found that the products are expensive, of poor value and provide consumers very little or no benefit (refer REP 470, REP 471, REP 492).
These proposals build on ASIC's recent work to improve outcomes for add-on insurance consumers including:
- ASIC's 2016 add-on insurance review leading to QBE refunding $15.8 million (refer 17–258MR)
- Working with the insurance industry to improve product design, distribution and sales practices, and
- Monitoring the sector's improvements through ASIC's data collection.
ASIC's MoneySmart website has information about add-on insurance and consumer credit insurance to help consumers work out if they will benefit from these products. Consumers can also download ASIC's MoneySmart Cars app, which will help them avoid common traps and identify hidden costs when buying a car.