ASIC INTERVENTION RISKS FURTHER DAMAGING AUTOMOTIVE INDUSTRY

The Australian Automotive Dealer Association’s submission to ASIC’s proposed intervention order on the sale of automotive add-on insurance and warranty products has expressed concern that the intervention will further harm the industry and its ability to service its customers.

ASIC sought stakeholder feedback on a proposed product intervention order on the sale of add-on insurance and warranty products sold with motor vehicles, with submissions due by 19 August.

ASIC is considering using its product intervention powers to address what it believes is significant consumer detriment in this market.

It followed ASIC’s earlier consultation through Consultation Paper 324 Product intervention: The sale of add-on financial products through caryard intermediaries (CP 324), published in October 2019. The initial consultation sought views on ASIC’s proposal to use the product intervention power in Pt 7.9A of the Corporations Act 2001 to introduce a deferred sales model for the sale of add-on insurance and warranties by caryards.

ASIC also undertook additional work to consider the impact of the COVID-19 environment on the market in recent months.

The consultation process

Before making a product intervention order, ASIC must consult persons who are reasonably likely to be affected by the order.

In response to the submissions received to CP 324, ASIC has made a number of changes to the proposed product intervention order.

AADA CEO James Voortman said ASIC’s revised proposed intervention order comes at a time in which the industry is struggling amid historical declines in new car sales.

“This year, we are on track to have the worst new car sales result in two decades and the steepest decline on record. Dealers are focused on keeping the doors open and holding onto their employees and unnecessary regulation will only compound their situation,” he said.

“Our members in Melbourne have been forced to close their doors and all Dealers are feeling the pressure from the effects of the pandemic. If issued, this intervention order will risk further economic harm to Dealers and limit their ability to sell credible insurance products to customers in need.

“ASIC’s scrutiny of these products in recent years has had the desired effect, leading to a capping of commissions, insurers withdrawing from the market and improvements in insurance and warranty products. Consumers have benefited from improved insurance and warranty products and ASIC should be commended for the role they have played in driving these outcomes.”

Mr Voortman argued that instead of denying consumers the ability to purchase reputable insurance and warranty products, the focus should be on those poorly constructed products available for sale.

“ASIC should target the design of these products rather than the sales process and channel through which such products are sold,” he said.

“We remain of the view that ASIC’s work is a duplication of the effort being led by Treasury which is working on a whole of economy model.

“We would hope that by aligning the automotive industry with the rest of the economy, new car Dealers will be able to assist customers that have genuine need for appropriate insurance products.”

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