Insurance Australia Group admits it should have acted sooner to squash its incentives for car dealers to drive sales of so-called junk add-on insurance.
Australia’s biggest insurer offered car dealers as much as 50 per cent commissions to push the add-ons, on which it earned $1.07 billion in premiums over a decade in which it only paid out a 10th in claims.
The financial services royal commission heard in August the incentives and commission for car and motorbike dealerships were designed to drive sales, but the add-ons offered little to no value for the costumer.
IAG chair Elizabeth Bryan told shareholders on Friday the financial industry’s grilling represented a catalyst for change.
‘It is already clear that many of the issues highlighted so far are the result of a failure to consider the best outcomes for customers,’ Ms Bryan told IAG’s annual general meeting.
‘In our own back yard, this certainly was the case with the add-on insurance sold by Swann through car yards.’
IAG sold Swann Insurance motor vehicle distribution rights in 2016 and stopped selling add-on insurance through motorcycle dealers in October 2017.
‘But in hindsight, we could have acted earlier,’ Ms Bryan said.