ACCC proposes to deny authorisation for insurance companies to jointly set a cap on sales commissions

17 February 2017

The Australian Competition and Consumer Commission has issued a draft determination proposing 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 Australian Securities and Investments Commission (ASIC) report, A market that is failing consumers: The sale of add-on insurance through car dealers, found that consumers are being sold expensive products that often provide little to no benefit. At the point of sale the consumer is focused on the purchase of a vehicle, not insurance, and the sales environment involves high-pressure selling tactics, a lack of adequate information, very high commissions, and conflicts of interest.

“The factors identified in ASIC’s report mean that consumers are often unable to make optimal, well-informed choices when buying add-on insurance products when buying a car from a dealer. A cap on commissions does not address these issues and will not remove the opportunity and incentive for insurers and dealerships to sell consumers expensive, poor value products,” ACCC Chairman Rod Sims said.

“This proposal doesn’t help to create an environment where consumers are in control and can benefit from effective competition. It is unlikely to address these market failures or improve the industry for consumers.”  

“The ACCC considers that the proposed cap is unlikely to result in a public benefit.”

“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,” Mr Sims said.


Add-on insurance products are products that may be sold at the time of purchasing a motor vehicle. The add-on insurance may be connected to finance associated with the motor vehicle such as consumer credit insurance, gap insurance, walk away insurance, and trauma insurance. Alternatively, it may relate to the vehicle itself, such as comprehensive insurance, extended warranty insurance, or tyre and rim insurance.

The ASIC report, A market that is failing consumers: The sale of add-on insurance through car dealers, identifies 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.

Further information about the application for authorisation is available on the ACCC Authorisations Register.

Release number: 
MR 13/17
ACCC Infocentre: 

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