Consumer safeguards around add-on insurance should be strengthened by extending the industry’s code of practice to all sellers of such products, a governance committee report says.

The add-on market is larger than previously recognised, with about 2 million products sold last year, according to the report. About one-third of sales do not fall under the code.

“All insurance sales should be fair and ethical and all consumers buying insurance should benefit from the same protections offered by the code, irrespective of the means by which the products are sold,” Code Governance Committee Chairman Lynelle Briggs said.

The report finds 3% of add-on sales are made directly by code subscribers, while external authorised representatives make up the largest sales channel.

Other external sellers, which account for 31% of add-on sales, are not covered and include insurance and finance brokers, banks, credit unions, car dealerships, airlines and ticketing retailers.

But the Insurance Council of Australia (ICA) says the governance committee may be overestimating the coverage gap.

It says a number of distributors cited come under Australian Securities and Investments Commission corporations legislation, which requires insurers to be responsible for their conduct. Banks and brokers are covered by other industry codes of practice and financial services licence requirements.

“Governance and consumer protections under these provisions provide a much wider application of cover than suggested in the report,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

“ICA believes further detailed research and analysis is needed to clearly determine the extent of any gaps in cover and potential remedies required.”

The Code Governance Committee began its inquiry into add-on insurance to address a knowledge gap around how the products are sold. It makes 22 recommendations and says more can be done to increase consumer protections, even within the code’s current reach.

Ms Briggs says improved supervision of authorised representatives is needed, with the inquiry finding a “disconnect” between insurer views about their oversight and the experiences and perceptions of consumers.

The report says extending the code would require time for implementation and for parties to adapt.

“This important work should begin now, so problems can be corrected before the introduction of even more distributed selling mechanisms and the arrival of other new disruptive players,” Ms Briggs said.

The committee intends to start regularly collecting, analysing and reporting on add-on insurance sales data in 2020. Code subscribers should begin routinely recording data on product sales, claims and complaints, it says.

ICA is reviewing the code of practice. An interim report last year included a proposal to provide product design and distribution guidance specific to add-on products.