The corporate regulator has found consumers are being “pressured” into buying “substantially more expensive” add-on insurance products when purchasing a car, which dealers are receiving a “high commission” for.
In a statement, ASIC said a recent review into the sale of life insurance through car dealers found that customers are being subjected to a sales process that is confusing and where some feel “pressured” to buy products they don’t understand.
In fact, the regulator’s review found that consumers can pay up to “18 times more” for life insurance products when purchased through a car dealer compared to similar term life insurance that will provide more cover.
According to ASIC, these car dealers were also paid a “high commission” by insurers for each policy they sold.
The review also found that clients valued the insurance they were sold for providing "peace of mind"; however, few could recall which products they had purchased, how much they cost and what they were actually covered for.
The consumers who did remember what they had bought said they “regretted their decisions”.
ASIC deputy chair Peter Kell said the regulator was calling on the insurance industry to lift its standards.
“The message to industry is clear: substantial improvements need to be made to both the design and distribution of these products," he said.
“Insurers must address the high costs, poor value and poor claim outcomes of their add-on products, especially when the very same insurers provide alternative products that offer cheaper and more comprehensive cover.”
He added: "If substantial and meaningful changes are not made we will need to take further action. ASIC will consider the full range of regulatory options available, including enforcement action.”
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