The industry has urged Treasury to consider amending its draft legislation for a number of general insurance-related reform measures made by the Hayne royal commission.

Submissions from the Insurance Council of Australia (ICA) and leading personal lines insurers IAG and Suncorp say the legislation in its current form could undermine consumers, including leaving them without adequate insurance cover.

Of particular concern are the proposals to end hawking of insurance products and the structure of the deferred sales model for add-ons.

ICA supports the aim of the anti-hawking action to protect consumers from pressure sales tactics, but wants what it sees as shortcomings in the proposed legislation addressed before implementation.

“In our view, the policy intent behind this recommendation could be more effectively achieved by targeted legislation which bans unsolicited telephone calls and other pressures sales tactics with appropriate levels of civil and criminal penalties,” ICA says in a lengthy submission to Treasury.

The proposal in its present form “goes well beyond the objective of protection from high-pressure selling and will largely remove the ability of insurers to engage proactively with their customers about products to optimise their level of protection,” the council says.

ICA warns the new anti-hawking provisions should not result in customers being unable to benefit from speaking with their insurers about bundled home and motor products.

IAG is similarly concerned the actions to curb hawking could prevent its consultants from providing advice to consumers that improve their awareness of insurance protection.

“We believe further changes to the current regime should be made in a pragmatic and reasonable manner, having regard to the robust consumer protection mechanisms that are available to consumers,” IAG says in its submission.

“Most importantly, the proposed reform should not preclude consumers from receiving information that helps them to make informed decisions concerning their genuine insurance needs.”

Treasury consultation on the draft exposure legislation to implement the reforms closed last month. The legislation covered 22 recommendations including several that are aimed at general insurance.

On the deferred sales model, ICA says the proposed structure - which would capture all add-ons by default - will lead to widespread consumer detriment.

“The [deferred sales model] as proposed would significantly reduce a customer’s ability to choose insurance products which provide them the coverage that they need, when they need it,” ICA says.

Suncorp in its submission backs removing the existing exemption of claims-handling and settlement from the definition of financial service. But the insurer is worried other elements of the proposed legislation could make complicate matters for consumers.

The insurer reaffirmed its previous concerns that the reform, which requires appointing suppliers such as electricians to become official representatives, could lead to significant compliance burden.

“The reform would slow our ability to respond to customer claims and would restrict competition,” Suncorp says.

Consumer advocates support Treasury’s draft legislation, with Financial Rights Legal Centre CEO Karen Cox saying the reform of insurance regulation “is long overdue”.