ASIC is calling on insurers to lift their game after two separate reports found confused car buyers are being pressured into expensive add-on insurance products that provide poor value.
ASIC Deputy Chair Peter Kell says insurers must address the high costs and poor claim outcomes of their add-on products, after a report found consumers can pay up to 18-times more for life insurance purchased through a car dealer.
“The message to industry is clear: substantial improvements need to be made to both the design and distribution of these products,” Kell says.
ASIC is now engaging with industry participants on the findings, with some insurers already committed to changing their pricing so that small business customers are charged the same amount as ordinary consumers.
Some insurers are also reviewing the design of their products to deliver better value.
“If substantial and meaningful changes are not made we will need to take further action,” Kell says.
“ASIC will consider the full range of regulatory options available, including enforcement action.”
ASIC reviewed five major life insurers, estimated to make up 90% of the market, and obtained detailed data about the way in which these products operate.
ASIC’s report, The sale of life insurance through car dealers: Taking consumers for a ride, found that many consumers who purchased add-on insurance products:
- Had no awareness of add-ons, including their value, before entering the car yard
- Had already invested large amounts of time and energy into buying the car and so, by the time they were offered the add-ons, found it hard to say no
- Valued the insurance for providing peace of mind, but could not recall which products they had purchased, how much they cost and what they were covered for
ASIC also released its report Buying add-on insurance in car yards: Why it can be hard to say no, which analysed qualitative research on the experience of consumers who are sold add-on insurance by car dealers.