ACCC rejects insurers’ car commission deal

The Australian Competition and Consumer Commission (ACCC) has rejected the combined effort of insurance companies to cap the commissions they pay to those that sell their add-on policies.

The insurance companies attempted to cap the commissions of car dealerships that that sell their add-on policies to 20%, after it was determined that the market was failing consumers.

In a statement, ACCC chairman Rob Sims said: “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.”

He went on to say that the ACCC were concerned the cap would stop the creation of more effective solutions that involve the add-on policies.

The problems with the commission cap were first highlighted when the Australian Securities and Investments Commission (ASIC) released a report on the issues that the cap was causing the market in September 2016.

The ACCC began to look into the matter, and in late February announced it had issued a draft determination proposing to deny authorisation for the insurers to cap commissions.

While a forced cap of 20% has been rejected, ASIC has said that a voluntary 20% cap would help to make the product cheaper for consumers.