ACCC decides commissions cap has ‘no public benefit’

ACCC decides commissions cap has ‘no public benefit’



The Australian Competition and Consumer Commission has made a draft determination denying 16 insurers a cap on commissions on add-on insurance products, saying it is “unlikely to result in a public benefit”.

ACCC chairman Rod Sims says the proposal from the insurers to agree to a 20 per cent cap on commissions paid to car dealers who sell add-on insurance products is unlikely to improve the industry for consumers.

“This proposal doesn’t help to create an environment where consumers are in control and can benefit from effective competition. It is unlikely to address these market failures or improve the industry for consumers,” Mr Sims said.

“The ACCC considers that the proposed cap is unlikely to result in a public benefit.”

Mr Sims said a cap on commissions will not remove the opportunity and incentive for insurers and dealerships to sell consumers expensive, poor-value products.

He said implementing caps on commissions could significantly delay the development of more effective solutions to problems identified by ASIC.

“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,” Mr Sims said.

Add-on insurance products are products that may be sold at the time of purchasing a motor vehicle, and includes trauma insurance.

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