Three regulatory forces are converging on the dealer-distributed extended warranty market: Australian Financial Complaints Authority (AFCA) disputes involving Integrity Car Care (ICC) have raised questions about claims outcomes, a Full Federal Court decision has increased scrutiny of authorised representative arrangements, and the Australian Securities and Investments Commission (ASIC) has identified claims and complaint handling failures by insurers as a 2026 enforcement priority. For brokers, insurers, and compliance officers involved in embedded or add-on products, the ICC disputes provide a current example of how licensing, distribution, and customer outcome issues can intersect in practice.
Integrity Car Care Pty Ltd provides extended warranty products through dealer channels and holds itself out as a provider of vehicle warranty services. The company has maintained that certain dealer-distributed warranty products are not insurance contracts and therefore do not fall within the same regulatory framework as insurance products. The classification of extended warranties, however, depends on the product structure and circumstances of distribution, with ASIC guidance noting that some extended warranties may be financial products requiring Australian Financial Services (AFS) licensing.
That position is at odds with ICC’s own distribution documentation. Terms and conditions published by Covr Protection – an authorised representative of ICC – state that “Integrity Car Care Pty Ltd (ABN 58 056 621 893, AFS Licence No: 247069) is the product issuer and is responsible for paying the benefits detailed in this document.” ICC’s own authorised representative network names it as product issuer in the dealer channel – directly inconsistent with its claim to merely administer the product.
ASIC’s guidance states that extended warranties are generally financial products because they are facilities through which customers manage financial risks – and that depending on the circumstances, an extended warranty may amount to a contract of insurance, more likely so when it is provided by a third party to the sale of goods rather than by the manufacturer or retailer. An AFSL authorisation for general insurance products does not automatically extend to non-insurance extended warranties; providers dealing in both must ensure their licence covers both.
The authorised representative question became substantially more demanding following ASIC v BPS Financial Pty Ltd [2025] FCAFC 74. The Full Federal Court identified five factors showing BPS was not acting in a genuine representative capacity: the product was developed without any AFSL holder involvement; it had already been issued before the authorised representative appointment was formalised; the arrangement constituted “AFSL provisioning” – seeking a licensee to avoid obtaining its own licence; all key documentation was prepared and controlled by BPS alone, with BPS as the sole named contracting party; and the AFSL holder’s compliance oversight was nominal and retrospective rather than embedded in product governance.
The Court did not set a strict test, but the five factors provide useful guidance on what will be considered, and the decision suggests that AFSL licensee and authorised representative relationships and arrangements may need to be re-evaluated. A paper appointment as authorised representative is not sufficient – the exemption applies only where the service is provided in genuine representative capacity, assessed on substance over form.
For any dealer-distributed warranty product where the AFSL holder claims to administer rather than issue, where dealerships distribute without their own licensing, and where the AFSL holder’s involvement in product design and governance is limited, those five factors are a direct compliance checklist.
At least three AFCA determinations have gone against ICC. In February 2026, AFCA ruled in favour of customer Suresh Kumar, who purchased a five-year ICC plan in June 2023 following the lapse of his BMW’s manufacturer warranty. When he lodged a claim in October 2024 for engine failure, ICC denied it – classifying carbon build-up as a non-mechanical cause – then offered $8,707, approximately one-third of the repair cost.
Four ICC-approved repairers examined the vehicle. Three found valve failure and recommended engine replacement at $23,258. A fourth ICC-approved repairer reached the same conclusion at $28,882. ICC rejected both findings. “I went to a number of their approved repairers, but Integrity Car Care wasn’t agreeing with what the repairers had to say,” Kumar said, as reported by CHOICE. AFCA ordered a full engine replacement, reimbursement of testing and towing costs, and $2,500 for non-financial loss – up $1,000 from the mediation stage. “The firm’s handling of the matter was poor,” AFCA wrote. As of publication, an independent inspection found the replacement engine still had a misfire and the matter remained unresolved.
A lawyer with insurance law expertise, who asked not to be named to protect a family member’s privacy and who had her own dealer product claim denied, told CHOICE the product’s risk language is indistinguishable from regulated insurance. “They tried to tell me it wasn’t an insurance product at all, even though their AFSL clearly says that it’s a risk product. It’s the same risk wording that a company like Allianz has. They will say absolutely anything to mislead people into not making a claim or a complaint,” she said. ICC did not respond to a request for comment, according to CHOICE.
ASIC announced insurance complaints and claims handling as an explicit 2026 enforcement priority in November 2025, alongside private credit, financial reporting misconduct, and misleading pricing. ASIC commenced Federal Court proceedings against three insurers in the first half of 2025, and chair Sarah Court stated: “With premiums ever-increasing, claims rising, and insurance becoming increasingly out of reach, we will continue our focus on this sector.”
In 2024-25, AFCA received 34,231 general insurance complaints – a 17% increase – with add-on insurance accounting for 7,880 of those, or 23% of all general insurance disputes, with concerns commonly involving unfair sales practices, poor product design, inadequate disclosure, and misrepresentation. ASIC’s Report 492 found consumers received just 9 cents in claims for every premium dollar paid on add-on insurance sold in car yards. Insurers paid car dealers four times more in commissions than they paid in claims, with commissions reaching as high as 79% of the premium.
The Deferred Sales Model (DSM) framework is simultaneously under its second sunset review. On July 27, 2026, Treasury issued an exposure draft proposing to extend class exemptions until 2031. Stakeholder positions remain divided: the Australian Finance Industry Association (AFIA) submitted it strongly supports continuation of current class exemptions and recommends they be made permanent. The Financial Rights Legal Centre and Consumer Action Law Centre submitted the opposite – that their long-held position is that there should be few if any exemptions at all to the DSM, arguing that known behavioural biases inherent in the add-on sales process have been long exploited by the industry, prioritising commercial gain over selling suitable products. The consultation closes August 7, 2026; no outcome has been published as of this article’s publication. Whether the scope of the DSM expands to capture warranty products with insurance-equivalent risk language remains an open question – and the answer will determine whether the regulatory gap the ICC cases expose is closed or left to litigation.
