The Australian Competition and Consumer Commission (ACCC) has rejected a proposal by insurers for a 20% cap on commissions paid to car dealers who sell add-on insurance.

The final determination comes as no surprise, following a draft ruling last month.

Chairman Rod Sims says the cap would be unlikely to change sales incentives or the quality of products, “and consumers will still be sold products without being given adequate information”.

“While insurers would benefit from a cap at the expense of car dealers, this conduct is likely to lessen competition between insurers, including by creating greater opportunities for explicit or tacit collusion and greater shared knowledge between insurers of competitors’ costs,” he said.

“The ACCC is also concerned that these arrangements, if implemented, could significantly delay the development of more effective solutions to the problems that the Australian Securities and Investments Commission (ASIC) has identified.”

Following the draft determination last month, the ACCC offered to extend the timeframe for insurers to respond to its concerns.

But insurers did not provide a submission.

At last month’s Insurance Council of Australia forum, ASIC Chairman Greg Medcraft warned insurers to raise their game on the poor-value cover.

An ASIC report found add-on products have an overall claims ratio of just 9%, with car dealers receiving four times more in commission payments than consumers receive in claims.

Mr Medcraft says potential solutions include introducing a deferred sales model, raising training standards, holding insurers to account, enforcement action against insurers that breach the law and public reporting on individual insurer outcomes.