Actuarial consultant Finity says proposed deferred sales model regulations for add-on insurance should be applied in some areas only, allowing new product design and distribution rules and intervention powers to provide wider protection.

“Regulations should be applied to a narrow range of products, not all add-on insurances,” Finity says.

“Our reasons are, firstly, that there is a risk of onerous changes being applied that are against consumer interests, rather than protecting them.”

In an article prepared in collaboration with The Fold Legal, Finity notes new product rules and intervention powers given to the Australian Securities and Investments Commission (ASIC) are also a “more nuanced set of measures”.

The Hayne royal commission called for regulations that would protect consumers from pressure selling tactics common in add-on insurance and recommended a Treasury-led working party should develop a deferred sales model for add-on products “as soon as reasonably practical”.

The sale of add-on insurance through motor dealerships was a particular focus during the royal commission hearings.

ASIC last month announced further repayments of $14.7 million for consumers sold “worthless” products at car yards, bringing the total value of remediation to more than $130 million.

A general insurance code governance committee report published last year identified more than 20 add-on products.

Finity says anti-hawking recommendations may also have a major impact on add-on sales, depending on the approach taken.

The Fold Legal says it is important for insurers to be heavily involved in any consultation, with discussions to date focusing on the motor dealer channel. It also supports narrowly applying a deferred sales model in the first instance.

“We think it is unlikely that the regulators will have yet formed a view or have much prior exposure to the multitude of distribution channels and the differences in selling models in the market,” it says.

“For this reason, the industry should assist in shaping the regulation.”