media release (21-043MR)

ASIC consults on implementing a deferred sales model for add-on insurance products


ASIC is seeking stakeholder feedback on proposals for a Regulatory Guide and prescribed customer information for the forthcoming deferred sales model for add-on insurance.

The deferred sales model introduces a four-day pause between the sale of a principal product or service and the sale of an add-on insurance product.

The deferred sales model was recommended by the Financial Services Royal Commission (Royal Commission) and has been implemented by amendments to the Australian Securities and Investments Commission Act 2001 (the ASIC Act) to commence on 5 October 2021.

 ASIC is inviting feedback on:

  • draft Regulatory Guide 000 The deferred sales model for add-on insurance, which explains the scope of the deferred sales model, the obligations on add-on insurance providers and ASIC’s power to grant an individual exemption, and
  • ASIC’s proposal for the content, form and communication of information that must be given to customers to start the deferral period.

All interested stakeholders have until 23 April 2021 to provide feedback on CP 339.

Deputy Chair Karen Chester said, “This is a key Government reform flowing from the Royal Commission. ASIC is keen to help industry prepare for the new sales model which commences in October this year. We want to ensure this policy change improves consumer outcomes in the add-on insurance market. We welcome evidence-based feedback to our consultation.”

“The deferred sales model disrupts the sale of add-on insurance with a simple pause – allowing consumers the time to consider the merits of the insurance they’ve been offered and to compare with alternative products. Put simply, the deferred sales model supports consumer decision-making. It is important that its introduction is accompanied by design and distribution obligations. These changes will guide industry to remain focused on good product design, on selling to the right customers, and on fair sales practices.”

“We expect compliance with the deferred sales model from day one. We will not hesitate to take action in response to any failure to meet the new requirements. Better consumer outcomes and fewer sales of low-value or junk insurances will result from this reform.”

Exemptions from the deferred sales model

Section 12DY of the ASIC Act gives ASIC discretionary power to exempt an add-on insurance product or class of products sold by a specified person. Industry-wide class exemptions can be provided by Government regulation.

It is expected that ASIC will only provide exemptions in exceptional circumstances and where it would be inappropriate to provide an industry-wide class exemption for the product or class in question. 

Draft Regulatory Guide 000 The deferred sales model for add-on insurance provides guidance on ASIC’s approach to exemption applications and the type of information that will assist ASIC’s assessment of an application.

Applications will be considered in accordance with our general approach to relief set out in Regulatory Guide 51 and in a way that promotes the objectives of the deferred sales model and its consumer protection purpose.

The timeframe for a decision on applications cannot be guaranteed. Without prior relief, applicants must prepare to comply with the deferred sales model from 5 October 2021.



Recommendation 4.3 of the Royal Commission recommended the introduction of a deferred sales model for add-on insurance products in recognition of concerns that add-on insurance products represent poor value for consumers; insurers pay more in commissions than in claims; consumer outcomes are considerably worse than in markets where there is meaningful competition; and consumers are at risk of unfair sales and adverse outcomes.

The Government implemented the deferred sales model with passage of the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 in December 2020.

Previous ASIC work has highlighted systemic problems in the sale of add-on insurance through car yards and lenders. See Report 622 Consumer credit insurance: Poor value products and harmful sales practices issued in July 2019; Report 492 A market that is failing consumers: The sale of add-on insurance through car dealers issued in September 2016; Report 471 The sale of life insurance through car dealers: Taking consumers for a ride issued in February 2016; Report 470 Buying add-on insurance in car yards: Why it can be hard to say no in February 2016; See Report 256 Consumer credit insurance: A review of sales practices by authorised deposit taking institutions issued in October 2011.

Section 12DX of the ASIC Act provides that a class of add-on insurance products may be exempted from the deferred sales model though regulations. Treasury invited submissions on class exemptions through a process that closed on 15 February 2021. Any enquiries about class exemptions should be directed to:

Media enquiries: Contact ASIC Media Unit