Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Financial Services) Share this | Hansard source

I move:

(1) Schedule 3, page 36 (after line 14), at the end of section 12DX, add:

Pre-condition for making regulations

(3) Before making regulations for the purposes of subsection (1), the Governor-General must ensure the Minister is satisfied that the class of add-on insurance products has historically been good value.

This bill grants the Treasurer the power to exempt from the deferred sales model certain types of add-on insurance to be made via regulation. The amendment that I present today makes it necessary for add-on insurance products to receive an exemption to be regarded as having a history of good value for consumers. This amendment comes about as a result of the extensive consultations about this bill that the member for Whitlam and I have conducted with consumer groups over the course of the last couple of weeks. They were under the apprehension that, when the government was putting the deferred sales model together, it would be a complete model and there wouldn't be opportunities for particular products to be exempted. Consumer groups such as CHOICE and the Consumer Action Law Centre have raised significant concerns about the carve-out for travel insurance flagged by the Treasurer in his second reading speech. The concern is that this could leave Australians open to unscrupulous sales tactics and to being sold unsuitable and expensive travel insurance. This would further compound the major problems we saw with travel insurance during the COVID-19 crisis. Consumer groups said:

Commissioner Hayne recommended 'industry-wide' reform as well as abolishing exemptions and loopholes.

After a massive spike in travel insurance complaints during the pandemic, we believe that any exemptions should be limited to those which are good-value-for-money products only. CHOICE has pointed out that in 2020 it found that buying travel insurance through add-on channels can cost consumers up to 350 per cent more than buying it directly. Travel agents receive commissions of up to 65 per cent on the premiums that people pay, and airlines use online pressure tactics to make sales. We know that Qantas provides customers with only 10 minutes to read a 15,000-word product disclosure statement before flight purchase times out.

It's clear that add-on products do not have a history of being good value for consumers. For example, using a family of four who travel to Bali for 10 days, CHOICE said that Qantas will sell add-on travel insurance for $230. You can get the same product and the same cover directly from Travel Insurance Direct for $136. So Qantas is making a mark-up on their product of 69 per cent. Even poorer value is the example of Jetstar—good old Jetstar: never miss an opportunity! For the same family and the same trip it would charge a whopping $517. But the same cover could be bought directly from Good To Go! for $144. That's a 259 per cent mark-up from Jetstar—not bad if you can get it! This is simply a bad deal for many Australian consumers and hardworking families looking to take a well-earned holiday.

So travel insurance sold as an add-on product should be worthy of an exemption if it can prove that it is good value for money for the consumer. That's in the amendment that I've moved:

(3) Before making regulations for the purposes of subsection (1), the Governor-General must ensure the Minister is satisfied that the class of add-on insurance products has historically been good value.

If that amendment is included in this legislation it puts pressure on organisations like Qantas, Jetstar and travel agents that are selling travel insurance—and other organisations that are going to be seeking these exemptions by the minister to the deferred sales model—to prove that their product is good value for money.

I would argue that a 259 per cent mark-up on a product sold through a major airline in Australia is not good value for money and that therefore the minister shouldn't be granting an exemption to products such as this. It's clear that the add-on travel insurance industry has been very poor value for Australian consumers, with no signs of improving. If the government lets them off the hook with this exemption then we're not going to see any improvement in the industry, and the whole purpose of the Royal Commission in this area will be lost.

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