The general insurance industry body has said that the levels of commission for the sale of add-on insurance in car yards is excessive, but it does not back a ban.
Car dealers have been able to earn as much as 79% in commissions on the premiums for add-on insurance such as tyre and rim cover or gap cover, reports SBS News. The add-on insurance might not be wanted nor needed by the buyers.
Insurance Council of Australia CEO Rob Whelan, speaking at a hearing before the Royal Commission into misconduct in financial services, said the excessive levels of commission were unacceptable. He said the ICA would support a legislated cap on commissions paid to car dealers, having previously suggested it be limited to 20% of premiums. But he did not back banning the commissions.
"Banning commissions entirely would be, I think, a retrograde step," he told the Commission last Friday.
"But the idea of these excessive commissions of around 70%, nearly 80%, of premiums are exorbitant and encourage all the sorts of behaviour you were talking about before."
Senior counsel assisting the commission Rowena Orr said the issues with add-on insurance indicated there was a culture across the industry that prioritised making money over serving the interests of customers.
Five insurers are refunding A$118m ($86m) over add-on insurance sold through car dealerships to almost 213,000 people.