A Treasury‑led working group should develop an industry‑wide deferred sales model for the sale of any add‑on insurance products (except policies of comprehensive motor insurance). The model should be implemented as soon as is reasonably practicable.
The Government agrees to mandate deferred sales for add‑on insurance products and has tasked Treasury to develop an appropriate deferred sales model.
A deferred sales model would require consumers to separately engage with the insurance product that is being purchased rather than considering it at the same time as purchasing a typically much more expensive product.
The Government has also introduced the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 into Parliament. The Design and Distribution Obligations (DDOs) and the PIP seek to promote the provision of suitable financial products to consumers and to enable ASIC to proactively reduce the risk of consumer detriment from unsuitable products. These regimes will assist in preventing consumer detriment resulting from poor design or inappropriate distribution practices such as those in the design and sale of add‑on insurance products.
ASIC has agreed to consider the Royal Commission’s findings and recommendation in relation to the sale of add‑on insurance in its administration of the DDOs and potential use of the PIP.
This also responds to the recommendation of the Productivity Commission’s report Competition in the Australian Financial System to mandate a deferred sales model for all sales of add‑on insurance by car dealerships.