A Senate committee report into consumer protection in financial services has called for more time for the Hayne royal commission.

The Economics References Committee inquiry into the regulatory framework for the protection of consumers in the banking, insurance and financial services sector published its report yesterday.

The committee declines to make specific policy recommendations, as it expects most areas of concern to be tackled by the royal commission.

However, it says there are “significant problems” in the current system and more time is required to examine them all.

“Major systemic and structural issues remain in the system as a whole, and these continue to negatively impact consumers,” the report says.

It quotes the Financial Rights Legal Centre saying the insurance sector is “at least 20 years behind” banking in terms of addressing basic consumer issues from claims handling, to unfair contract terms, to problems with disclosure.

Add-on insurance sold through motor dealers was a focus of submissions, including one from the Australian Securities and Investments Commission highlighting that car dealers earned four times more in commission than policy holders received in claims.

Submissions were also received on the difficulties people with mental health conditions have accessing insurance.

“Empirical evidence and anecdotal reports demonstrate that many people with a mental health condition experience significant difficulties in obtaining and claiming on different types of insurance products, compared to the rest of the population,” Beyondblue said.

The inquiry also flagged an issue with financial services organisations not holding sufficient professional indemnity insurance.

The report says the royal commission has taken a “comprehensive and forensic” approach, but that many areas have still not been addressed.

“It seems unlikely, given the extent of misconduct and behaviour below community standards that has been indicated in public evidence so far, that the royal commission will be able to adequately cover issues in the financial sector beyond more than a few brief snapshots in the time that it has been allocated and the small number of witnesses that it has called in public hearings.

“The committee notes that the royal commission has only heard from 27 victims even though it received over 10,000 submissions and has not held any hearings in SA, WA and Tasmania.

“Given the extent of misconduct identified in the royal commission’s work to date, the committee considers that the royal commission should be granted an extension of time.”

The committee also calls for increased funding for community legal and financial counselling services dealing with victims of financial misconduct. These services are already working at capacity, the report says.

Such misconduct has “left a trail of ongoing destruction, featuring ruined businesses, impacts on health and relationships, financial problems and even bankruptcy on the part of affected consumers”.

“The royal commission’s findings to date have been profound and have revealed significant issues in the conduct and culture of financial services in Australia,” the report says.

“Ordinary Australians should never have had to bear the burden of this misconduct for so long.”

Click here to see the full report.