The corporate regulator is seeking feedback on its plan to implement the deferred sales model for add-on insurance, which will start on October 5 after laws for the new scheme were passed in Parliament last December.

Submissions are being sought for the draft regulatory guide explaining the scope of the scheme, obligations on add-on providers and powers to exempt specified entities/persons from the new laws, the Australian Securities and Investments Commission (ASIC) said today in a statement.

ASIC also wants input about its proposal for the content, form and communication of information that must be given to customers to start the deferral period.

When the deferred model comes into effect, distributors of add-on insurance products must wait for “four clear days” after a customer has committed to acquire a main product or service to pitch a sale.

The Hayne royal commission recommended the change after it heard in 2018 evidence of widespread problems with sale of add-on products sold through car dealers and banks. It concluded such products represented poor value to consumers, who often bought them under pressure from sales representatives.

“This is a key Government reform flowing from the [Hayne] royal commission,” Deputy Chairman Karen Chester said.

“ASIC is keen to help industry prepare for the new sales model which commences in October this year.

“We want to ensure this policy change improves consumer outcomes in the add-on insurance market. We welcome evidence-based feedback to our consultation.”

Some products will be exempted from the new regime. They include comprehensive motor insurance, products sold by financial advisers in the course of providing financial advice, products covered by an ASIC product intervention order that prescribes a deferred sales period and classes of add-on insurance products that are exempt in the ASIC Regulations.

Ms Chester says the deferred sales model “disrupts the sale of add-on insurance with a simple pause, allowing consumers the time to consider the merits of the insurance they’ve been offered and to compare with alternative products”.

“Put simply, the deferred sales model supports consumer decision-making,” she said. “It is important that its introduction is accompanied by design and distribution obligations. These changes will guide industry to remain focused on good product design, on selling to the right customers, and on fair sales practices.”

“We expect compliance with the deferred sales model from day one. We will not hesitate to take action in response to any failure to meet the new requirements. Better consumer outcomes and fewer sales of low-value or junk insurances will result from this reform.”

Closing date for submissions is April 23.

Click here for more on the consultation paper.