Competition watchdog rejects joint cap on add-ons

Competition watchdog rejects joint cap on add-ons | Insurance Business

Competition watchdog rejects joint cap on add-ons
A competition watchdog has denied insurers authorisation to put a joint cap on commissions paid to car dealers who sell their add-on insurance products.

The Australian Competition and Consumer Commission (ACCC) has rejected an application by 16 insurance companies to place a cap of 20% on car dealer commissions, as it would reduce competition and could delay the resolution of issues within the market.

“The ACCC is denying authorisation because we believe this proposal is unlikely to change sales incentives or the quality of products, and consumers will still be sold products without being given adequate information or opportunity to make a considered decision,” ACCC Chairman Rod Sims said.

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“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.”

Sims added: “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.”

Mid-February, ACCC published a draft determination proposing to deny authorisation. No submissions were received.

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