The Australian Financial Complaints Authority (AFCA) has published its submission to ASIC’s consultation on the proposed use of its product intervention powers to address significant consumer harm caused by the sale of add-on insurance and warranty products sold with motor vehicles.
AFCA strongly agrees with ASIC’S assessment of consumer detriment caused due to these add-on products being sold along with motor vehicles.
“AFCA’s submission highlights that we have seen instances of these products being sold to ineligible consumers who received little to no benefit from them and were unaware they were being sold these add-on products or the product’s purpose itself,” said Chief Ombudsman and Chief Executive Officer David Locke.
“AFCA strongly welcomes and supports ASIC’s proposal to make a product intervention order by legislative instrument that provides critical protections to consumers in relation to the way the add-on products are sold.
“AFCA believes that ASIC’s intervention will have direct benefit to the community and will drive up standards across the industry,” said Mr Locke.
AFCA’s submission also says that it is critical that consumers are provided with clear information to understand the type of add-on product they are presented with, including whether the product may provide benefit, and in what circumstances.
“In our experience, sale of add-on insurance products especially when sold along with the primary product, significantly increases the likelihood of a consumer being sold an insurance product that doesn’t meet their needs or offers little to no value for them.”
Additionally, AFCA says in its submission that all product issuers should at least be an AFCA member. For intermediaries involved in the sale and/or distribution of the product, they should also be AFCA members if an AFCA member is not responsible for their conduct.
“Given the findings by ASIC on the low value that add-on products provide and the unprecedented circumstances due to the COVID-19 pandemic, it is essential to ensure all consumers entering these types of products have access to free and independent external dispute resolution, to raise any issues about these products.”
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- The Australian Financial Complaints Authority (AFCA) is a non-government organisation providing free, fair and independent help with financial disputes.
- AFCA is a one-stop-shop for consumers and small businesses who have a dispute with their financial firm, over things such as banking, credit, insurance, advice, investments or superannuation.
- Where an agreement cannot be reached between parties, AFCA can issue decisions that are binding on financial firms.
- AFCA has responsibilities to identify, resolve and report on systemic issues and to notify the Australian Securities and Investments Commission (ASIC), and other regulators, of serious contraventions of the law.