AFCA submission to ASIC’s product intervention power on add-on insurance

The Australian Financial Complaints Authority (AFCA) has published its submission to ASIC’s consultation on the proposed use of its product intervention powers to address significant consumer harm caused by the sale of add-on insurance and warranty products sold with motor vehicles.

AFCA has indicated that it strongly agrees with ASIC’S assessment of consumer detriment caused due to these add-on products being sold along with motor vehicles.

Chief Ombudsman and Chief Executive Officer David Locke said, “AFCA’s submission highlights that we have seen instances of these products being sold to ineligible consumers who received little to no benefit from them and were unaware they were being sold these add-on products or the product’s purpose itself.”

“AFCA believes that ASIC’s intervention will have direct benefit to the community and will drive up standards across the industry,” said Locke.

AFCA’s submission states that it is critical that consumers are provided with clear information to understand the type of add-on product they are presented with, including whether the product may provide benefit, and in what circumstances. AFCA also stated that all product issuers should at least be an AFCA member. For intermediaries involved in the sale and/or distribution of the product, they should also be AFCA members if an AFCA member is not responsible for their conduct.

“Given the findings by ASIC on the low value that add-on products provide and the unprecedented circumstances due to the COVID-19 pandemic, it is essential to ensure all consumers entering these types of products have access to free and independent external dispute resolution, to raise any issues about these products.”

You can read the entire submission by downloading it: AFCA’s submission to ASIC – Using the product intervention power: add-on motor vehicle financial risk products.