News, Regulations , ,

A LAST minute intervention by the Australian Treasurer, Josh Frydenberg, has freed up a considerable proportion of the new vehicle market from the extremely prescriptive restrictions imposed by the Australian Securities and Investments Commission (ASIC) on sales of add-on insurance and warranty protection products from dealerships.

Under new Deferred Sales Model (DSM) rules introduced on October 5, dealers face a period of time where they are forbidden to hold verbal conversations with car buyers in the four days immediately after the sale of the car and other restrictions on the way customers can be contacted for up to six weeks.


Resurrecting dealer insurance sales

Will ‘Deferred Sales Model’ harm dealers?

Cone of silence


The rules applied even to the people who told the dealer they wanted the products and were prepared to pay for them on the spot.  Nor could a customer agree to leave a credit card and have the dealer put the policy through at the end of the four-day period.

And, unlike in the UK where they have similar rules, such was ASIC’s desire to protect people from themselves, even buyers in Australia were unable to declare themselves sophisticated shoppers and voluntarily exempt themselves from the deferred sales period.

But the treasurer, just weeks before the October 5 start date, announced a change in the regulations that means that most business customers will be able to buy add-on insurance and warranty products from dealers without having to undergo the pause in sales discussions that will now be imposed only on private buyers. 

Under the new regulations from Treasury, any buyer furnishing an Australian Business Number or an Australian Company Number can by-pass the DSM conditions providing the premium is greater than $1000. 

The exemption for businesses was already in place but it only applied if the premium was greater than $40,000. 

Damian Chadwick

The lowering of the premium threshold dramatically alters the number of sales transactions in dealerships that now fall outside the deferred sales period rules. This is a huge fillip for the add-on insurance industry and for dealers selling these services given that more than half of vehicle purchases in Australia are made by businesses or through businesses. 

Damian Chadwick, CEO of add-on insurance and warranty provider, AWN Insurance, told GoAutoNews Premium: “The changes to the business exemption by Treasury offer the industry welcomed relief. 

“In the coming days, we will release an update to our system which will make this transaction type seamless for our agents.

“However, given the dual criteria of ABN or ACN and a value over $1,000.00, we are advising our agents to proceed with caution to avoid unwanted breaches if the insurance premium should fall short”.

According to ASIC rules, these are the meanings for the following terms;


Business-related add-on insurance product if: 

  1. The add-on insurance product is offered or sold to a consumer in connection with the consumer acquiring, or entering into a commitment to acquire, another product or service in the course of carrying on a business; and
  2. The price of the add-on insurance product exceeds $1,000.

motor vehicle: has the meaning given by subsection 12BA(1) of the Act.


What does this mean for dealers?

Mr Chadwick comments “This opens the door to several transactions that can take place at the time of delivery. And while the 4 day delayed sale does not apply to these transactions, we encourage our agents to apply the remaining enhancements we have introduced to ensure this type of sale meets the new industry standards.”

 

By John Mellor

Dealer Auction
VACC
Schmick