The Australian Securities and Investments Commission (ASIC) has released a consultation paper outlining its product intervention power enforcement plan for add-on insurance cover sold by car dealers.

Under the plan, a four-day deferred sales scheme would be introduced and complemented with additional obligations imposed on product providers. ASIC intends to also monitor the impact of these changes.

The ASIC plan complements Treasury’s proposals to improve supervision of motor add-on covers, which offer little to no value to consumers who have bought them.

“There has been a history of unfair conduct and poor results for consumers in the add-on insurance market,” ASIC Commissioner Sean Hughes said.

“We have seen policies sold to consumers when they have been ineligible to claim under them. ASIC has secured over $130 million in refunds to compensate consumers for their losses from these practices.”

The proposed cooling off period would apply to add-on insurance and warranties, and start after a consumer has made a financial commitment to purchase a used or new vehicle, according to the consultation paper.

Additionally the consumer must be provided a “roadmap” with information about the add-on and its associated cost at the start of the cooling off period.

“We anticipate that some consumers may use the deferral period to consider the information provided and conduct further research. Equally, other consumers may pay no further attention to information about products they had not actively sought in the first place,” the consultation paper says.

Comprehensive or compulsory third party covers are exempt from the deferred scheme, as are manufacturers’ warranties for new cars.

The ASIC plan has not gone down well with consumer advocates.

The Consumer Action Law Centre says the proposal “lacks teeth” to protect Australians from “worthless junk insurance” sold via car intermediaries.

It wants a 30-day deferred sales period, instead of the four days flagged in the ASIC plan.

“Put plainly, add-on insurance sold in car yards is junk,” the centre’s CEO Gerard Brody said.

“Unfortunately, the sale of junk insurance is a lucrative business for car yards, whose sales personnel are motivated by eye-watering commissions for each policy sold.

“Car dealers cannot be trusted to sell insurance.”

The closing date for the ASIC consultation is November 12.

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