The corporate regulator, the Australian Securities and Investments Commission (ASIC), has reprimanded the country's largest insurance companies for recommending "disappointing" proposals for the overhaul of car insurance products on which many policyholders were not even eligible to claim.
The newspaper The Australian reported today that it had obtained a letter sent to the Insurance Council of Australia (ICA) in May under the Freedom of Information laws.
In the letter, ASIC senior manager Emma Curtis said the corporate watchdog had a number of “high level” concerns about the sector’s proposals including the fact that the proposals were “too narrow in scope” and failed to “place sufficient emphasis on addressing root causes of the issue”.
She said the sector’s neglect in terms of setting a timeline for when customers who were sold useless insurance would be compensated “reflects poorly on the level of commitment or engagement by ICA members”.
“Where there are stated time frames, these are often unacceptably long, and there is no explanation as to why more speedy progress is not possible,” Ms Curtis wrote.
“Given the industry has been on notice for a significant period of time, this is disappointing and not indicative of industry commitment to making changes quickly.”
An industry-wide review in 2016 by ASIC found extreme rates of high-pressure sales tactics, inadequate information, sky-high commissions and conflicts of interest were used by dealerships to sell consumers credit, gap and walkaway insurance. The review found car dealers were receiving commissions four to five times as much as consumers received in claims despite an extremely low claims payout of less than 10 cents for every dollar charged in premiums.