GOAUTONEWS Premium approached the Australian Securities and Investment Commission (ASIC) for comment on the position put to us by various insurance and car dealer sources.

According to a spokesperson for the organisation: “ASIC does not have predetermined or fixed views on changes that should be made to improve outcomes for consumers. That is why we will seek feedback from industry on a public consultation on possible reforms, including the deferred sales model”.

“We are actively engaging with industry on improving outcomes for consumers. There were three representatives from car dealers are on our add on insurance working group which met three times this year.

“Our report found industry-wide deficits when it came to the sale of add-on insurance by car dealers. Industry has conceded they need to lift standards, and have committed to improving their practices,” the spokesperson said.

“We found many add on insurance products offered through car dealerships provide very poor value, in circumstances where the sales process inhibits good or informed consumer decision-making. Add-on insurance was the focus of this report, not comprehensive car insurance.”

According to ASIC their report found:

• Policies were sold to consumers in unfair circumstances, including sales of policies to consumers who were ineligible to claim under them, and sales of policies where the amount of the premium was higher than the maximum amount the consumer could claim.
• Over a three year period (the Financial Years 2013-2015) car dealers and brokers earned $602.2 million in commissions while consumers only received $144 million in claims. Intermediaries therefore benefited over four times more than consumers from the sale of these products.  
• One insurer charged small business insureds who bought cars 80 per cent more for the same product than consumers buying cars for personal use, because of the absence of regulation of business-use transactions under the National Consumer Credit Protection Act 2009.  
• On average, consumers received less than 10 cents in the dollar back in claims from poorly designed add-on insurance products. By comparison, car insurance can return 85 cents in the dollar in claims and home insurance 55 cents in the dollar.

By John Mellor