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ASIC seeks reform on add-on life insurance

The corporate regulator has proposed to use its product intervention power to reform the sale of add-on financial products such as life insurance by car yards.

ASIC said in a statement that it is taking this action to address ongoing concerns about consumer harms from the sale of add-on insurance and warranty products by car yards.

ASIC’s product intervention power allows it to intervene where financial products have resulted in, or are likely to result in, significant consumer detriment, and allows the regulator to directly confront, and respond to, business models that cause, or create a risk of consumer detriment, in the financial sector.

In 2016, ASIC put out its Report 471: The sale of life insurance through car dealers: Taking consumers for a ride.

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The report suggested that car yard life insurance is poor value for money and it can be much more expensive than other forms of life insurance.

Further, it found that car yard life insurance can be sold when it is not necessary, such as to young people with no dependants.

In announcing the consultation, ASIC commissioner Sean Hughes said there has been a history of unfair conduct and poor results for consumers in the add-on insurance market.

“We have seen policies sold to consumers when they have been ineligible to claim under them. ASIC has secured over $130 million in refunds to compensate consumers for their losses from these practices,” Mr Hughes said.

“As well as compensation for past conduct we are proposing changes to improve consumer outcomes in the future.”

ASIC seeks reform on add-on life insurance
ASIC
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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