The government has put forward a new “deferred” sales model for add-on insurance products, including inflated premiums for travel insurance bought during the online ticket sales process.

It comes following The Royal Commission which highlighted “poor consumer outcomes arising from the sale of add-on insurance”.

Choice, for instance, compared 30-day worldwide travel insurance policies sold during the booking process on Qantas, Virgin Australia and Jetstar international flights.

The consumer group found that the cover represented poor value compared with standalone policies.

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Image: Jp Valery/Unsplash

Issues raised included charging adult prices for children, who can be insured ‘next to nothing’ direct with an insurer.

Taking the example of a 30-day family trip to the US, Choice found that Qantas charged the adult amount for children aged 12 and older for a total cost of $1448.

That compares with a similar $577 standalone policy from the same underwriter that is free for under-25s travelling with adults.

Choice believes these findings “point to inherent limitations in the personal suitability of travel insurance sold in conjunction with tickets or travel packages”.

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Travel insurance sold as an add-on is also more likely to cover only generic events and could overlook more specific or unusual risks.

So the solution proposed? A deferred sales model would apply to any insurance product offered at the same time as the purchase of a primary product.

Under the model, once consumers have purchased a “primary product” they will receive prescribed information about the add-on insurance product. They have four days to accept or decline the offer.

The aim is that the deferral period will encourage consumers to consider the merits of the insurance being offered and to consult alternative providers.

There will also be the option for ASIC to exempt products where the benefits of being able to purchase add-on insurance immediately outweigh the benefits of deferral.

The government’s proposed model for industry consultation can be read here.

AFTA has weighed in on the proposal with a response which you can read here. ATFA largely agrees with the proposal, saying consumers have the right to get a good deal and the right travel insurance product for their trip.