ACCC moves on commissions for car dealers

Spotlight turns on insurance products that provide

17 February 2017 David McCowen

The ACCC has moved on insurance products that provide little benefit to consumers. Photo: Rob Homer

Australia's consumer watchdog is set to deny proposed changes to after-sales products peddled by car dealers.

The ACCC says it will deny authorisation to 16 insurance companies that proposed a 20 per cent cap on commission to car dealers who sell extended warranties, credit insurance and other financial products.

A fellow government body, the Australian Securities and Investment Commission, released a report in September 2016 that found "consumers are being sold expensive, poor value products... that provide consumers very little to no benefit" in a sales environment with "pressure selling, very high commissions and conflict of interest".

ASIC said at the time that the market needs to be "immediately and comprehensively addressed by insurers". Following that, 16 insurance companies banded together to cap commissions paid to car dealers who sell their products.

ACCC chair Rod Sims says they need to do more.

"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," he says.

"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."

The ACCC expects to release a final decision on the matter in March.

Read the full ACCC statement here.

Drive Comments

2 Comments

Reggie | 2017-02-19 21:26:56

Speaking of pressure selling and conflicts of interest, why doesn't the ACCC have a look at how many car dealerships have their service managers on commissions.

Circling Buzzard | 2017-02-19 23:42:09

This is long overdue,as a car dealer from the 70s till retirement in 07 I would not allow these supposed insurance policies to be offered by sales staff. They all sound good until one reads the fine print and the exclusions and limitations and onus placed on the buyers made these nothing more than junk. The insurers covered virtually nothing except their own arses. Policies like unemployment insurance didn't cover the first few weeks or months and ceased after maybe 6 months and extended warranty had so many clauses that when read carefully meant you paid plenty for the cover but most likely found your situation was excluded if you made a claim. These products commissions added quite a few $$ to the gross profit in a sale so in many dealerships they became important to both the salesman and the dealership. Frankly there are better ways of doing business than tricking a client with dodgy products.