Special Post-Convention Edition
Oscar Wilde is reported to have often commented that the only thing worse than being talked about is to not be talked about at all…
I was not sure about the accuracy of that observation as the media hyped up an intense barrage of ill-informed comment on our industry stimulated by the ASIC market report on ‘add-on’ insurance products sold by car dealers.
(Access the full report here ASIC Insurance Report)
A careful reading of the ASIC report raises some perplexing issues and inconsistencies.
For example: –
• the report quotes figures that ASIC assembled over a three-year period on a highly selective sub-set of data for a range of insurances. The data are limited to gap insurance, CCI, mechanical breakdown insurance, tyre and rim insurance and loan termination insurance – the ‘add on’ insurances chosen by ASIC
• the data exclude comprehensive motor vehicle insurance – a significant ‘add on’ insurance sold in our industry – and this exclusion is difficult to understand
• a probable explanation is that the metrics on comprehensive insurance don’t advance the narrative in a way that suits the regulator – a classic case of ‘…don’t confuse me with all the facts…’
• APRA, the government authority charged with supervising the insurance industry publishes comprehensive reports on premium revenue and loss ratios across the entire range of products offered by the insurers. (This information may be found at APRA Insurance Data-June-2016). The ASIC report makes no reference to this much more comprehensive data. Why?
• the headline for this report – and remember this headline was written by ASIC – reads as follows…
“…ASIC puts insurers on notice to address serious failures in the sale of add-on insurance through car dealers…”
• it is therefore fair to ask why most of the media attention is on dealers when the design of the products, the structure of the rate cards and the commission programs are all controlled by the insurance industry – not by franchised dealers
• the report makes a prominent point that consumers received ‘just’ 9% of the $1.6 billon premium revenue back in claims on this selective list of products – an irrelevant point in the context of how insurance works over long time frames – loss ratios go up and down (as the APRA data referenced above shows)
There are many other aspects of this report that are deeply concerning to us.
One of the most obvious is the lack of consultation with dealers on this issue. This failure to engage is made all the more perplexing in the context of the strong and effective meetings and phone calls we have had with ASIC on flex commissions and origination fees.
In our view, sound regulatory frameworks require consistency, equity and fairness across all products and channels. The lack of a ‘level playing field’ approach in this case is alarming – think about the sales channels for white goods and electrical home appliances and the associated add-on products which they sell.
These considerations lead to the thought that ASIC sees franchised car dealers as convenient ‘whipping boys’ – particularly at a time when other, bigger and more worthy targets appear to be far more elusive for them. Perhaps we are the easy headline?
I have always subscribed to a saying one of my early bosses in the car business taught me…
not out to get you…”
I am leaving today to spend some time in the United Kingdom. This is primarily to visit family but I will also meet with the National Franchised Dealer Association and the Society of Motor Manufacturers and Traders. These two bodies are roughly the equivalents of AADA and the FCAI.
With so much going on in our business I will of course be available 24/7 by phone and email during this absence.
As ever, I wish you…
Good luck and good selling!