A company selling car repair warranties will refund $4.9 million to thousands of customers who were sold high-priced cover by sales staff chasing bigger commissions.

National Warranty Company will repay 6,367 customers after it let sales staff charge their own prices for a repair warranty, with a higher sale price ensuring bigger commission.

The Australian Securities and Investments Commission says NWC breached conflicted remuneration rules by using a commission structure that encouraged staff to sell warranties at the highest possible price.

‘The more expensive the warranty, the larger the sales commission,’ ASIC said in a statement on Thursday.

NWC will now refund customers the difference between what they ended up paying and the cheapest possible price at which the warranty should have been sold, plus interest.

The refunds apply to some warranties sold between July 1, 2013, and May 28, 2015.

NWC no longer issues these types of warranties and any refund does not affect a future claim if it falls within the terms of their policy, ASIC said.

ASIC acting chair Peter Kell said companies had to comply with the law.

‘Product issuers should always design their incentives in a way that promotes good consumer outcomes,’ Mr Kell said.

The action is part of ASIC’s two-year pursuit of shonky add-on insurance practices through car dealers.

On Wednesday, the watchdog announced that insurers Suncorp and Allianz would refund a combined $62.8 million to 109,000 customers who were sold worthless or near-worthless insurance add-ons when buying cars at dealerships.

NWC is a subsidiary of Presidian Group which was acquired by car leasing giant McMillan Shakespeare (MMS) in February, 2015.

MMS chief executive Mark Blackburn on Thursday said NWC reported the breaches in December 2014, before the acquisition and several months before the final problematic warranties were sold.

Mr Blackburn said the resolution of the matter with ASIC would not impact the ASX-listed group.

‘Approximately $5 million has been specifically retained in escrow as security for loss or liability incurred by MMS as a consequence of the outcome of ASIC’s investigations,’ Mr Blackburn said in a statement.