The Australian Prudential Regulation Authority (APRA) has confirmed that Eric Insurance has made a commercial decision to enter run-off and will no longer write new business or renew policies, with some exceptions.

The exceptions apply for a limited period of time to honour existing contractual arrangements, an APRA spokesman told insuranceNEWS.com.au.

“APRA has formalised this decision with an adjustment to Eric Insurance’s licence and will continue to closely supervise Eric Insurance to ensure it meets its obligations to existing policyholders,” he said.

No immediate comment was available from Eric Insurance, which in recent years has provided comprehensive automotive cover and products including warranty, tyre and wheel and consumer credit insurance sold through dealers.

The business was rebranded as Eric Insurance in July 2016 by Avea Insurance, which had acquired IAG-owned Swann Insurance’s distribution rights for franchise motor dealers.

Eric Insurance had recently written to dealers telling them it was to enter run-off and would no longer write new policies from the end of this month.

The decision follows the introduction of a deferred sales model that has brought a significant shift in the way add-on cover is sold across a number of sectors.

AWN Group, which also provides cover in the auto sector, has invested time and resources to make improvements in response to the new model, Group MD Damian Chadwick told insuranceNEWS.com.au, while Eric had explored insurance-like alternatives.

“We took the mindset that we had to break things down, understand what the legislation was trying to achieve and find a way to surpass those expectations,” Mr Chadwick said. “Eric really were looking to find alternatives, and that didn’t serve them well.”

The deferred sales model for add-on insurance products, which provide cover related to a main item being purchased, took effect from October 5 2021.

The rules introduced a mandatory four-day pause between the sale of a principal product or service and the add-on cover, with the aim of reducing the potential for high-pressure sales scenarios.

Changes were introduced following a Hayne royal commission recommendation and the new rules are overseen by the Australian Securities and Investments Commission.

A previously posted non-renewal notice on Eric’s website had said it had stopped offering motor vehicle insurance due to a change in strategic direction. At that time, it said other products, such as warranty were not affected and it would continue to write new business in all lines other than comprehensive motor vehicle insurance.