The Australian Securities and Investments Commission (ASIC) has released a consultation paper on its proposals to reform the way add-on insurance and warranties are sold via car dealerships.

ASIC proposes a deferred sales model in which consumers have more time to decide if they need the add-on products.

It also suggests an enhanced supervision obligation on the industry, with requirements for insurers to supervise and monitor their authorised representatives selling the products.

The plans do not apply to comprehensive or compulsory third party insurance.

The consultation follows the release last year of three ASIC reports showing add-on products sold by car dealers are expensive, offer poor value and often provide little or no benefit.

“These reports found systemic problems with the sale of add-on products through this distribution channel,” the consultation paper says.

“The lack of competitive pressure and the significant financial benefits that can be earned from the sale of add-on products through caryard intermediaries mean consumers are at risk of continuing harm of adverse outcomes through unfair sales practices.

“Given the risk of continuing consumer harm and the limited effectiveness of other measures, we consider there is a need for reforms.”

Submissions must be received by October 23. For more information, click here.