ASIC has released a consultation paper on a proposal to use its product intervention power to reform the sale of add-on financial products by car yards.
Announcing the consultation ASIC Commissioner Sean Hughes said, “There has been a history of unfair conduct and poor results for consumers in the add-on insurance market. We have seen policies sold to consumers when they have been ineligible to claim under them. ASIC has secured over $130 million in refunds to compensate consumers for their losses from these practices.”
“As well as compensation for past conduct we are proposing changes to improve consumer outcomes in the future. We welcome submissions from all interested parties.”
National Insurance Brokers Association CEO, Dallas Booth has said, “NIBA will have a close look at the consultation paper and will respond as appropriate.”
Consultation Paper 324 Product intervention: The sale of add-on financial products through caryard intermediaries seeks views on the following proposals:
- Introducing a deferred sales model—applying a deferred sales model to sales of add-on insurance products and warranties by caryards, other than comprehensive or compulsory third party (CTP) insurance, and manufacturers’ warranties provided with new cars. This would apply to all sales where finance is arranged for motor vehicles, including by car dealers, finance brokers and salary packaging firms.
- Complementing the deferred sales model with additional obligations—this would include other requirements such as:
- the use of ‘knock out’ questions to prohibit sales where the product has low or no value; and
- prohibiting the sale of warranties that provide low levels of cover (where the maximum amount that can be claimed is $2000 or less).
- Monitoring the impact of these proposals—If we make an intervention order we propose to collect data from insurers and warranty providers, so that we can monitor whether the interventions are operating as intended.