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Consumer groups: Insurance exemption loopholes undermine spirit of Hayne reforms

Yesterday the Morrison Government announced that it would provide sweeping exemptions to the insurance industry from Financial Services Royal Commission reforms designed to improve insurance sales practices.

Commissioner Hayne recommended that the Government implement an ‘economy wide’ deferred sales model for add on insurance products after the Royal Commission heard evidence of high-pressure sales and unsuitable add on insurance being sold to consumers. On 10 December 2020, the Government passed laws that introduced a deferred sales model with a four-day pause between the sale of a principal product or service and the sale of an add-on insurance product.

However, the Government has now provided numerous exemptions that weaken the reforms. Consumer groups say these exemptions risk undermining Commissioner Hayne’s recommendation for an ‘economy wide’ deferred sales model. Classes of insurance products exempt from the laws include:

  • third party property damage, fire and theft insurance for motor vehicles;
  • comprehensive insurance for boats, motorcycles, motorhomes, caravans, and trucks;
  • insurance sold within superannuation (including group life insurance);
  • home building insurance
  • home and contents insurance; and
  • landlord insurance.

“Exemptions should only be provided where there is clear evidence that an exemption would benefit consumers. Treasury still has not published any submissions from the consultation process on exemptions – what evidence did industry provide to justify these regulatory loopholes?” asked Consumer Action Law Centre CEO Gerard Brody.

“Commissioner Hayne specifically warned against regulatory loopholes and exemptions in the law, yet the Government is already poking holes in its own legislation. This should be about protecting consumers, not insurers’ bottom line,” he said.

CEO of Financial Rights Legal Centre Karen Cox said the decision to exempt key insurance products from the deferred sales regime, “…will entrench the problems we have seen in the add-on space for years – add-on products that provide poor coverage and are more expensive versus the broader coverage and cheaper products available in the direct insurance space.

“These exemptions are just more of the same old loopholes handed out to the same old insurers leading to the same poor outcomes for consumers we have seen for decades.”


Media contact: Mark Pearce, Media and Communications Adviser, 0413 299 567,

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