Consumers often yield to car dealers’ pressure to buy add-on insurance products such as motor cover, according to a report from the Australian Securities and Investments Commission (ASIC).

In most cases consumers do not have sufficient product knowledge to make informed decisions on policies, it says. And by the time add-on products are offered, after choosing a car and negotiating the price, consumers are often too tired to resist sales pitches.

“Our analysis of consumers’ experiences with add-on insurance products indicates the process used to sell these products through dealerships, in particular the timing of the offer, can be effective in securing sales,” ASIC says.

“It also shows consumer decision-making about add-on insurance products may be influenced by other behavioural factors such as ‘decision fatigue’ and ‘information overload’.”

ASIC’s report draws on findings from five focus groups and 13 interviews with consumers who have recently been sold insurance when buying a new or used car.

The regulator is concerned about add-on products because staff are often given incentives to make sales. In some cases up to 75% of the premium is paid as commission.

Some consumers say they were given little information, including on exclusion clauses, and found sales tactics to be pressurising.

A Melbourne consumer told ASIC salespeople “only talk about the inclusions… they don’t talk about the exclusion”.

Consumer Action Law Centre Senior Policy Officer David Leermakers says the report highlights the risk of allowing such sales at car dealerships.

“This get-rich-quick scheme for car dealers and finance providers has to end,” he said. “Insurers need to stop selling this junk.

“Salespeople earn up to 90% commission on some of these products that are such poor value, and it encourages them to sell in an underhanded and sneaky way.”

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