Community legal centres have slammed the Treasurer’s decision to exempt a large number of products from the new deferred sales model for add-on insurance, saying the move badly weakens the reform recommended by the Hayne royal commission.
Hayne recommended an “industry wide” deferred sales model as a way of overcoming high pressure sales tactics.
The Treasurer announced that after consultation the government will exempt the following classes of insurance products: compulsory third party insurance for motor vehicles: third party property damage, fire and theft insurance for motor vehicles; comprehensive insurance for boats, motorcycles, motorhomes, caravans and tricks; insurance sold within superannuation; postage and delivery of consumer goods insurance; home building insurance; home and contents insurance; and landlord insurance.
Consumer Action Law Centre chief executive Gerard Brody said: “Exemptions should only be provided where there is clear evidence that an exemption would benefit consumers. Treasury still has not published any submissions from the consultation process on exemptions.
“What evidence did industry provide to justify these regulatory loopholes?”
ASIC has reported on the failings of consumer credit and other add-on insurance for a number of years. In a 2018 report, it found that across all add-on insurance products it reviewed over three years, the gross amount returned to consumers in claims was only nine cents for every dollar of premium paid. By comparison, home insurance returns around 55 cents in the dollar.