Consumer groups have rejected Australian Securities and Investments Commission (ASIC) plans that would delay add-on insurance product sales reforms, arguing buyers face greater immediate risks due to the coronavirus pandemic.

Draft product intervention orders have proposed a three-month transition period, while also retaining six-month delays for certain obligations around the sale of add-on products through caryards.

A joint submission from the Consumer Action Law Centre, the Financial Rights Legal Centre and Westjustice says there are “signs” some businesses are seeking to exploit the increased fear and uncertainty that challenging financial times bring.

“These are products that have long been misleadingly sold on the suggestion they offer financial protection,” they say.

“Effective and timely intervention is essential to protect the increasing numbers of financially strapped consumers who might be more susceptible to these sales tactics.”

The submissions say the draft order would significantly reduce the detriment caused by “junk” financial products, but some parts have been “watered down” and have left loopholes that can be exploited by auto dealers, insurers and warranty providers.

Consumer groups are also calling for the removal of exclusions for insurance sold for no consideration, or as the result of an extension to a motor vehicle loan or lease.

“Harm can come from a ‘free product’, particularly where it is used to convince a person to buy a car that turns out to be a lemon,” they say.