Treasury has published for consultation a Proposal paper on reforms to the sale of add-on insurance products.
The paper outlines the Government’s proposal for an industry-wide deferred sales model for add-on insurance products.
It is proposed for the deferred sales model to apply to those insurance products that are offered or sold at the same time as when a consumer purchases the primary product or acquires finance for which the insurance covers associated risks.
Add-on insurance sold in a standalone market would remain outside the scope of the model.
The model achieves this by introducing an enforced pause in the sales process between the purchase of a primary product and their decision to purchase addon insurance. The deferral period will enable and encourage consumers to consider the merits of the insurance offered and to consult alternative providers.
The Government recognises the diversity of add-on insurance products available and acknowledges that different products cause varying degrees of consumer harm. That is why the Government proposes a ‘graduated’ deferred sales model of three tiers. Each tier will be regulated differently.
Tier 1: Products causing significant consumer detriment (ASIC Product Intervention Powe).
Tier 2: Default tier for all add-on insurance products (not in tiers one and three) (Legislated deferred sales model).
Tier 3: Case-by-case exemptions for products that meet relevant criteria (Legislated ASIC exemptions power).
The Government intends to consult on and introduce legislation by 30 June 2020 to implement the model.