ob体育 has released a consultation paper on a proposal to use its product intervention power to reform the sale of add-on financial products by car yards.
ob体育 is taking this action to address ongoing concerns about consumer harms from the sale of add-on insurance and warranty products by car yards.
Consultation Paper 324聽Product intervention: The sale of add-on financial products through caryard intermediaries (CP 324) seeks views on the following proposals:
- Introducing a deferred sales model鈥攁pplying a deferred sales model to sales of add-on insurance products and warranties by caryards, other than comprehensive or compulsory third party (CTP) insurance, and manufacturers鈥� warranties provided with new cars. This would apply to all sales where finance is arranged for motor vehicles, including by car dealers, finance brokers and salary packaging firms.
- Complementing the deferred sales model with additional obligations鈥攖his would include other requirements such as:
- the use of 鈥榢nock out鈥� questions to prohibit sales where the product has low or no value; and
- prohibiting the sale of warranties that provide low levels of cover (where the maximum amount that can be claimed is $2000 or less).
- Monitoring the impact of these proposals鈥擨f we make an intervention order we propose to collect data from insurers and warranty providers, so that we can monitor whether the interventions are operating as intended.
The product intervention power allows ob体育 to intervene where financial products have resulted in or are likely to result in, significant consumer detriment. It allows ob体育 to directly confront, and respond to, business models that cause, or create a risk of consumer detriment, in the financial sector.
Announcing the consultation ob体育 Commissioner Sean Hughes said, 鈥楾here 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. ob体育 has secured over $130 million in refunds to compensate consumers for their losses from these practices.
As well as compensation for past conduct we are proposing changes to improve consumer outcomes in the future. We welcome submissions from all interested parties.鈥�
ob体育 seeks the public鈥檚 input on the proposed intervention order by Tuesday 12 November 2019. Submissions should be sent to: [email protected].
ob体育鈥檚 work complements the concurrent consultation by the Commonwealth Treasury: see .
All intervention orders made must be published on ob体育鈥檚 website, and a public notice is to be issued in relation to the intervention.
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Background
On 4 April 2019 ob体育 published a media release welcoming new laws to protect financial service consumers.
In 2016 ob体育 released three reports into the design, distribution and sale of add-on insurance products sold through car dealerships:
- Report 470 Buying add-on insurance in car yards: Why it can be hard to say no (REP 470)聽
- Report 471 The sale of life insurance through car dealers: Taking consumers for a ride (REP 471).
- Report 492 A market that is failing consumers: The sale of add-on insurance through car dealers (REP 492)
In 2017 we issued Consultation Paper 294 The sale of add-on insurance and warranties through caryard intermediaries (CP 294), which sought views on whether or not a deferred sales model should be introduced for the sale of both insurance and warranty add-on financial products.
Since releasing our three reports in 2016, we have also reviewed warranties sold with motor vehicles. We have also identified poor consumer outcomes in relation to these products, consistent with our findings in Reports 470, 471 and 492.
For details of the remediation ob体育 has obtained for consumers from the sale of add-on product providers: see 19-146MR ob体育 announces further add-on insurance refunds, bringing total to over $130 million
Consumers can find out more details about add-on insurance by visiting . Consumers can also download ob体育's , which will help them avoid common traps and identify hidden costs when buying a car.