ACCC denying insurance caps

The Australian Competition and Consumer Commission (ACCC) issued a draft determination on Friday to deny a 20 per cent cap on commissions paid to car dealers who sell add-on products for insurance companies. Last September, The Australian Securities and Investments Commission (ASIC) issued a report which claimed the market was “failing consumers”, who were being sold expensive products with little benefit. The report found that consumers received $144 million in successful claims from the $1.6 billion in insurance premiums paid over three years. Add-on insurance is sold at the time of purchasing a motor vehicle and includes both financial insurance, such as consumer credit insurance, gap insurance, walk-away insurance, trauma insurance and vehicle insurance, including comprehensive insurance, extended warranty insurance, or tyre and rim insurance. “The factors identified in ASIC’s report mean that consumers are often unable to make optimal, well-informed choices when buying add-on insurance products when buying a car from a dealer. A cap on commissions does not address these issues,” ACCC Chairman Rod Sims said. “The ACCC considers that the proposed cap is unlikely to result in a public benefit.” “While insurers would benefit from a cap at the expense of car dealers, this conduct is likely to lessen competition between insurers, including by creating greater opportunities for explicit or tacit collusion and greater shared knowledge between insurers of competitors’ costs,” he added. The Australian Automotive Dealer Association (AADA), who has been fighting the proposal since it was first announced, is “delighted” with the determination. “It accords strongly with the direction of our own submissions on this subject and represents the accomplishment of many hours of hard work and the strong representations we have put before ACCC on this vital issue.” AADA CEO David Blackhall said. The ACCC will continue accepting submissions until a final decision is reached on March 3.