The insurance industry has welcomed exemptions for a number of classes of products from the deferred sales model for add-on insurance, which starts October 5, which were revealed by the Federal Government today.

The new regime prohibits the sale of add-on insurance for at least four days after a consumer has entered into a commitment to acquire the principal product or service.

The regulatory exemptions for some insurance products, which come after industry consultation, were a “win for insurers and consumers,” the Insurance Council of Australia (ICA) said.

The Government has addressed concerns that the application of the deferred sales model may have led to an increased risk of non-insurance and under-insurance in relation to essential insurance products such as motor, home and contents, the ICA said.

“Today’s announcement shows the Government has listened to the concerns of the industry and applied appropriate exemptions, so consumers are able to get immediate insurance cover to protect their valuable purchases,” ICA CEO Andrew Hall said.

Both third party property damage, fire and theft insurance for motor vehicles and compulsory third party (CTP) insurance were granted an exemption.

The Government also waived the regime for comprehensive insurance for boats, motorcycles, motorhomes, caravans, and trucks, as well as insurance sold within superannuation, including group life insurance.

Also exempt are insurance for the postage and delivery of consumer goods, home building, home and contents and landlord insurance, and wholesale style insurances available to businesses were granted exceptions.

“As consultation has demonstrated, careful implementation will be required to ensure the deferred sales model continues to allow small business and consumers to access the insurance they legitimately need,” a statement from Treasurer Josh Frydenberg said today.

Treasury had sought feedback from industry regarding regulatory exemptions after the sales model laws were passed by Parliament in December in line with the Hayne royal commission recommendations.

The National Insurance Brokers Association (NIBA) had called for the exemption to be extended to third party, fire and theft. It warned the new laws could expose consumers to immediate financial risk in some scenarios, including rental vehicle hiring, same-day transportation of livestock, and other examples where the purchase of a product or service results in the immediate assumption of risk.

The ICA worked with the Government, saying the new rules should support economic recovery and ensure businesses and consumers can transact efficiently and seamlessly. Today, Treasury said consultation had demonstrated the need to “avoid inadvertently impacting our economic recovery from COVID-19”.

The ICA says it identified a limited number of add-on insurance product classes that represented an exceptionally high level of value for customers.

Basic banking products will be exempt where the customer initiates contact, including transaction accounts, stored value cards, electronic cash, direct debit services and electronic payment services.

The Government says it will continue to consult with stakeholders on any additional exemptions that may be appropriate.