ACCC to deny authorisation to 16 insurance companies to jointly cap sales commissions

On 17 February 2017 the Australian Competition and Consumer Commission issued a draft determination that proposes to deny authorisation to 16 insurance companies to agree to a cap of 20 per cent on commissions paid to car dealers who sell their add-on insurance products.

The ACCC concluded that the arrangement was likely to “lessen competition between insurers, including by creating greater opportunities for explicit or tacit collusion and greater shared knowledge between insurers of competitors’ costs.”

Add-on insurance products are products that may be sold at the time of purchasing a motor vehicle.

It may be connected to:

  • finance associated with the motor vehicle such as consumer credit insurance, guaranteed asset protection (GAP) insurance, loan termination or walk away protection insurance, and trauma insurance; or
  • the vehicle itself, such as comprehensive insurance, extended warranty insurance, mechanical breakdown insurance or tyre and rim insurance.

 

The ACCC draft determination follows a review by ASIC relating to add-on insurance products in the car industry which prompted the insurers to make the application to the ACCC.

The ASIC report released in September 2016 identified issues such as a lack of price competition, poorly designed products, poor value for money relative to premiums, and a complex sales process that often did not disclose the total cost of the cover.

The ACCC expects to release its final decision in March 2017.

A copy of the ACCC draft determination can be found at:

http://www.accc.gov.au/media-release/accc-proposes-to-deny-authorisation-for-insurance-companies-to-jointly-set-a-cap-on-sales-commissions

For further advice about the potential competition, insurance or regulatory implications please contact our Corporate Advisory and Financial Services Principal – Michael Bracken.


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