Regulators disagree on add-on insurance solution

The ACCC has announced that it has issued a draft determination proposing to deny authorisation to 16 insurance companies to collectively agree to a cap of 20 per cent on commissions paid to car dealers who sell their add-on general and life insurance products.

UPDATE 13 March 2017: ACCC has issued a final determination denying authorisation to 16 insurance companies to agree to a cap of 20 per cent on commissions paid to car dealers who sell their add-on insurance products.

The insurers’ application was made in response to an Australian Securities and Investment Commission (ASIC) report that concluded that a significant reduction should be made in the amount of commissions paid to anyone who sells an add-on insurance product through car dealers. Background.

In response the ACCC says that a cap on commissions will not remove the opportunity and incentive for insurers and dealerships to sell consumers expensive, poor value products.

The ACCC concluded that the proposed cap is unlikely to result in a public benefit.

The ACCC Chairman said:

“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.”

“The ACCC is also concerned that these arrangements, if implemented, could significantly delay the development of more effective solutions to the problems that ASIC has identified” .

The ACCC expects to release its final decision in March 2017.

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