Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I want to commend the member for Kingsford Smith for bringing this important amendment to the House. The amendment deals with schedule 3 of the bill before the House, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which is the provision within the bill that implements the government's commitment to an industry-wide deferred sales model for add-on insurance.

How does this work? Many members of the House would be familiar with this. You go and buy a car. The helpful salesperson—genuinely, I say—will say, 'You want to ensure that you've got your green slip sorted out, your compulsory third party sorted out.' There's nothing wrong with that; it's compulsory. It's a very competitive market with generally well-priced insurance. But it won't surprise many members of this place who have bought a car recently to know that the helpful salesperson will then try and upsell you another form of insurance: 'Sir, you know that we have tyre and rim insurance available for that car. Would you like to get tyre and rim insurance?' If you're a hapless consumer who's happened to take out tyre and rim insurance, you'll probably realise some time down the track that you have purchased—and I won't call it junk insurance—a low-value product. It's low value when you look at the claims ratio. There's a whole bunch of reasons we know it's a very low-value product.

The royal commission highlighted that some of these products were often representing extremely poor value for consumers and were poor-value products sold in a high-pressure environment. You're trying to get out the door, and the salesperson is trying to give you yet more products in addition to the one that you came into the store to buy. These are high-pressure sales tactics.

The existing schedule to the bill will ensure that consumers are given not one, not two, not three but four days to consider their purchase of insurance. There's nothing wrong with the person who sold you the product telling you: 'We've got an insurance product available to you. I can't sell it to you now. I'll contact you in another four or five days to see whether you want it.' They cannot make it a condition or bundle it up in the sale at that point in time. In other commercial dealings we call this a cooling-off period. It gives the consumer the ability to confer with other insurance providers, other underwriters, as to how that product compares with a bunch of other products, to see whether they are getting good value, which is a sensible move. But Labor wants to ensure that, if the government takes the view that a deferred sales model is not appropriate for a particular product, it has to be a high-value product.

An example that the Treasurer specifically indicated in his second reading speech is travel insurance. It may be the case that travel insurance warrants a carve-out from the deferred sales model. It has been put to me by industry representatives that the consequence of not having travel insurance and some fateful event occurring while you're overseas is enormous. Whether it's a health incident where you have to pay immediately the cost of that health insurance while not knowing the details of a health system, whether it's lost baggage or lost essential products, or whether it's some change to your airline's ticketing arrangement, the consequences can be dramatic for somebody in a very vulnerable circumstance. So the travel industry says, 'Whatever the merits of the deferred sales model, you need to think about the fact that a consumer in these circumstances is likely to expose themselves to great risk, and there is a very high risk that the consumer forgets to take out that insurance.' They may be right, but we want to look at the actual value of that product. And if the value of the product— (Time expired)

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