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

I moved this amendment because of the extensive consultations that the member for Whitlam and I have had with community groups representing consumers, particularly those consumers who have been in a bad situation with or have been ripped off by the insurers that offer these products. The reason we are moving this amendment is that there has been a litany of cases and studies into add-on insurance which point to the fact that the commissions are outrageous and that, essentially, they are selling junk insurance. In a lot of cases the premium that's paid by the consumer is actually greater than the product insured for the particular type of insurance.

When the royal commission looked at this issue they were very clear in their recommendation that there should be a deferred period—a cooling-off period, if you like—through which the consumer should have the benefit of thinking about whether or not they wish to take out a particular type of insurance. We all know the situation, because we have all been in it. You go along and you buy a car. It's a big purchase and you are all excited. You spend a lot of money, but you are excited about your purchase. Then you are bamboozled with all of these insurance products that can be sold to you by the person selling you the car. It is not disclosed, on many occasions, that that person is receiving a commission for trying to sell you that particular product. They come with extensive product disclosure statements that you never read before you sign on the dotted line and, before you know it, you have walked away with a junk insurance product under which the premium that you pay either upfront or over the life of the insurance is more than the sum insured.

The royal commission was quite clear that that is the model that should be put in place—giving people four days to cool off and think about it. But with this bill the government have come in and said, 'We want to grant the minister the power, through regulation.' Again, this adds to this trend of the government putting things into regulations rather than having the parliament deal with them in the primary legislation. This is giving the power to the Treasurer, of all people, to exempt particular types of insurance products. There's nothing in the bill about whether or not that particular type of insurance is good value for money, whether it has historically been the right product for people in that particular industry or, indeed, whether the people selling it must disclose the commissions they are getting. They can be quite hefty commissions and the products can represent bad value for money for the consumer.

That's why we believe that it's not unreasonable for the Treasurer to agree to this amendment and for the Treasurer to have to demonstrate that he or she is satisfied that that class of add-on insurance—which the Treasurer is about to give an exemption to—represents a product that has historically been good value for money. If this amendment goes through, it will ensure the integrity of what the royal commissioner recommended in his recommendation about the deferred-sales model. It will ensure that insurers can't get away with pulling the wool over the government's eyes and getting them to grant an exemption simply because they're a powerful lobby group or they're a member of a representative organisation that is a powerful lobby group and has the ear of government and manages to convince enough members of the government at the time to convince the minister to exempt a particular product.

I mentioned in my earlier speech some examples of insurance where the consumer does not get good value for money. When you look at the travel insurance industry it can't be said, on the whole, that all those products represent good value for money. I gave the example of Jetstar increasing their premium by upwards of 250 per cent as a mark-up. I don't think that represents good value for money for the consumer. So, it's not unreasonable for this parliament to agree to ensure that the legislation contains that guarantee that the product is good value for money for the consumer before the minister signs off on that exemption.

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