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The Australian Competition and Consumer Commission (ACCC) has denied authorisation to 16 insurance companies to impose a cap of 20 per cent on commissions paid to car dealers who sell add-on insurance products.

Earlier last month the ACCC already published a draft determination that stated it would be unlikely authorisation would be granted.

Extra time was allotted after the initial draft was released to allow insurers time to respond. No submission of response to the draft was provided and as such the initial draft stands.

ACCC chairman
ACCC chairman Rod Sims

ACCC chairman Rod Sims said the changes that were proposed were unlikely to change sales incentives for insurers or product quality.

“Consumers will still be sold products without being given adequate information or opportunity to make a considered decision

“While insurers would benefit from a cap at the expense of car dealers, this conduct is 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.

“The ACCC is also concerned that these arrangements, if implemented, could significantly delay the development of more effective solutions to the problems that ASIC has identified.”

Add-on insurance has been a recent issue for the government with the Australian Securities and Investments Commission (ASIC) also investigating the products.

A report released by ASIC identified issues with the product to be a lack of price competition, poorly designed products, poor value for money relative to premiums, and a complex sales process that often does not disclose the total cost of the cover.

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