Consumer advocates have called for an end to the sale of some add-on insurance products.

They say the Productivity Commission’s proposal for a deferred sales model is an important first step towards improving consumer outcomes but does not go far enough.

The joint submission from the Consumer Action Law Centre, Financial Counselling Australia and the Financial Rights Legal Centre says it’s not clear that a deferred sales model “would resolve the widespread problems of add-on insurance mis-selling in every case”.

“In many instances, withdrawal of this product from sale would be the preferable approach.

“It is low-value, sold to many people who are ineligible to claim and/or replicates cover people have under other insurance, such as life insurance in superannuation.”

The Consumer Action Law Centre’s DemandARefund.com website has helped about 400 customers claim back more than $1 million on mis-sold add-on products.

The Productivity Commission’s draft report on financial system competition suggests the Australian Securities and Investments Commission should mandate a deferred sales model for all add-on insurance at car dealerships.

After that, Treasury should establish a working group to extend the deferred sales model to all add-on products, it says.