Treasury has just released a proposal paper on reforms to the sale of add-on insurance products.
Add-on insurance products and associated sales practices have received widespread scrutiny from ASIC, the Productivity Commission and most recently the financial services Royal Commission.
These reviews have identified issues in add-on insurance markets including pressure-selling, poor claims ratios and low levels of consumer engagement. On 4 February 2019, the Government responding to recommendations by the Royal Commission and the Productivity Commission agreed to mandate an industry-wide deferred sales model for add-on insurance products and tasked Treasury to develop an appropriate deferred sales model.
This paper outlines the Government’s proposal for an industry-wide deferred sales model for add-on insurance products. In line with the Royal Commission recommendation the model will capture all add-on insurance products by default and minimise exemptions. Exemptions should only arise where there is strong quantitative evidence of product value and consumer understanding.
The Government will be consulting on the implementation of all recommendations of the Royal Commission through exposure draft legislation.
Any feedback on the proposed model should be provided by 30 September 2019 and should specifically address the request for feedback boxes. Feedback should be focussed on how the measure can best be implemented, not whether it should be implemented. Submissions not consistent with this will not be considered.
The Government intends to consult on and introduce legislation by 30 June 2020 to implement the model. You can click here for more information regarding making a submission.