The AADA has received an update from ASIC regarding their add-on insurance and extended warranty work. ASIC have made a significant departure from their previous approach and are treating insurance and extended warranty products through separate processes. The AADA secretariat has been consulting with ASIC for some time on its proposed changes and it appears that as a result much of what is being proposed is less onerous than originally anticipated.
ASIC have decided to refrain from using their Product Intervention Order (PIO) powers specifically for add-on insurance products in the automotive sector.
Instead, these products will now be subject to the economy-wide Deferred Sales Model (DSM) which is being applied by Treasury to all add-on insurance products. A summary of the new industry wide DSM can be downloaded below. This summary is taken from the explanatory memorandum to the Draft Legislation and is only intended as a guide regarding the incoming regulations. Members are advised to obtain specialist advice and speak to their add-on insurance providers for more details.
This DSM is a lot less onerous than what ASIC had been proposing in their draft intervention orders. Comprehensive car insurance is exempt from the DSM and the model will be in place as of 5 October 2021.
Members are strongly advised to work with their add-on providers to ensure they are prepared for the incoming changes and have the required consumer information.
ASIC will be issuing a new draft PIO for the sale of extended warranties. While we await the revised order, ASIC have stated that it will be designed to mirror the structure and operation of the industry-wide DSM. We expect that this means it is less restrictive than what was originally proposed, however will withhold judgement until we see a revised draft.
The secretariat will continue to work with the AADA F&I workgroup on the new changes and the incoming PIO on extended warranties. Members will be advised of any further changes as they occur.