An ASIC investigation into the sale of add-on general insurance policies through car dealers and found that the market is failing consumers.
Specifically, the report found that consumers are being sold expensive, poor value products; products that provide consumers very little to no benefit; and a sales environment with pressure selling, very high commissions and conflicts of interest.
ASIC said it will be undertaking further work, including potential enforcement action, to ensure that this market delivers “acceptable outcomes” for consumers.
While not directly related, the super industry would be wise to take note of ASIC’s messages, said solicitor director at The Fold Legal, Jaime Lumsden Kelly.
“The superannuation industry has already been under scrutiny recently in terms of SMSF delivering acceptable retirement outcomes. Superannuation insurance is different to insurance sold through car dealers because the super trustee owns the policy and usually the member has no direct rights to claim,” she said.
“However, given current scrutiny on retirement outcomes, past scrutiny on superannuation insurance, and the face that super members do still pay for the insurance, I think the super industry would be wise to read the ASIC report and take to heart any relevant lessons. This is particularly so as trustees have greater obligations to their members than insurers do to insurers.
“For example the commission issue may not be so pressing in a superannuation context, but super trustees should consider claims ratios on policies they buy. If claims rates are low, is there an awareness issue? Are members not claiming because they don't know what they are covered for, or because covers are too restrictive to be useful? Are products suited to insured members, that is, do they offer the cover members need at prices that provide value?
“I certainly think ASIC's comments on consumer awareness and product design are relevant, along with some others. It may be that on investigation super insurance isn't affected by the issues ASIC raises, I don't know, but it would be wise for trustees to check.”