INSURANCE and finance industry players searching for fresh sales techniques and structures to restore add-on insurance income that has been devastated by the deferred sales requirements of ASIC, believe they may have found the answer in North America.

As reported in GoAutoNews Premium last week, the add-on insurance industry has seen sales reversals in dealerships of as much as 90 per cent since last October when the insurance regulator put a five-day delay between the selling of a car and any attempts to sell add-on insurance.

The measures have thrown such confusion into the market, with private car buyers failing to understand why they cannot protect themselves from the time they buy the car. In addition financiers and dealers are throwing in the towel on selling add-on insurance because of confusion regarding the new rules and fear of penalties.

The Australian Securities and Investments Commission (ASIC) drafted the rules based on similar legislation in the United Kingdom. However, while the UK legislation was limited to Gap insurance, the Australian Deferred Sales Model (DSM) is wider reaching.

GoAutoNews Premium has been told that industry players tried to present the regulator with other options; however, the outcome of the Haynes Royal Commission was too damaging. So eight months after the rules came into play, the question is: “Is the cure worse than the disease?”.

There are two imperatives here. The industry wants to adopt a model that addresses ASIC’s concerns that private buyers were being rushed into products they didn’t understand, could not afford or derive a benefit from. But the challenge is also to meet the commercial needs of car retailers seeking a viable sales process that reclaims lost revenue.

The CEO of AWN Insurance Damian Chadwick told GoAutoNews Premium that his company has been researching the industry in other countries like the United States and Canada and found there is a fundamental difference in the relationship between car dealers and the providers of insurance.

“While researching and developing new products for the Australian market, it was interesting to see how car retailers interact with general insurance providers in other markets, particularly for warranty.”

“While it’s commonplace in Australia for a dealership to sell a third party’s warranty, in other parts of the world (Canada, North America), the dealership sells their own warranty, and the insurance relationship is one of reinsurance.
“In the past, this variation could have been considered insignificant; however, this model becomes advantageous to Australian dealers with the introduction of the DSM.

“I like this model because the dealership and the insurer are in a true partnership,” Mr Chadwick said.

“It is important not to mistake this model for traditional administration, which would be nothing new. This is another level of program management which incorporates actuarial reporting, regulatory governance, and sound underwriting principles, with continuous training, product development and marketing support.

“In short, the dealer gets the best of both worlds, and keeps the regulator happy.”

Mr Chadwich said: “There is no doubt that insurance products still offer consumers and the dealership with the highest level of protection.”

He said that at the AADA Convention next week, the company’s KaCare team would be “sharing with the industry how managed programs enhance customer experience, create increased touchpoints, and optimise dealer profitability”.

By John Mellor