The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry found that the levels of commissions paid to motor vehicle dealers in connection with the sale of add-on insurance products has contributed to mis-selling of these products. Often, the value of the commissions paid in relation to add-on insurance products sold through vehicle dealers has significantly exceeded the amounts paid out to consumers through claims. High levels of commissions have contributed to poor consumer outcomes. The Royal Commission recommended ASIC be given the power to impose a cap on the amount of commissions that may be paid to vehicle dealers in relation to the sale of add-on products (recommendation 4.4).
Consistent with the Government’s response to this Royal Commission recommendation, the Government has released for public consultation exposure draft legislation to provide ASIC with the power to impose a cap commissions for add-on insurance products and insurance-like products such as warranties sold by car dealers. Providing ASIC with the ability to cap commissions will ensure an appropriate cap is set and varied if required in response to any future concerns.