The Australian Securities and Investment Commission (ASIC) has put insurance companies on notice for “failing” consumers.
A report released by the watchdog has revealed that over a three year period, consumers have paid $1.6 billion in premiums while only receiving $144 million in successful insurance claims.
The add-on 'benefits' sold to customers pertain have been sold during the purchase of a new or used car.
The report has also found that car dealerships have earned $602 million in commission – a whopping four times the amount consumers have received in claims.
ASIC deputy chairman Peter Kell has said the organisation will continue to investigate the insurance market.
“There are serious problems in this market that need to be immediately and comprehensively addressed by insurers.
"ASIC will be undertaking further work, including potential enforcement action, to ensure that this market delivers acceptable outcomes for consumers.
“We will also be looking at how insurers can refund consumers who have been sold inappropriate products.”
Insurers have notified ASIC that they will implement a 20 per cent cap on commissions.
Kell said that while the move is welcome, the watchdog will be monitoring the industry closely.
“While we welcome the initial steps taken by the insurers to improve the value of these products for consumers, there is still a long way to go.
“If industry does not deliver swift improvements for consumers, ASIC will take further action, including enforcement action where appropriate.”