SHARE

Insurance giants Allianz and Suncorp will refund a combined $65.2 million to more than 100,000 customers who were sold valueless add-on insurance through car dealerships.

Key points:

  • Allianz and Suncorp have been reprimanded by the corporate regulator as part of an ongoing review of add-on insurance sold through car yards
  • ASIC found several products from the insurers provided "little or no value" to customers
  • Allianz will refund $45.6 million, while Suncorp's refund will total $17.2 million

Allianz will refund $45.6 million to 68,000 customers after the Australian Securities and Investment Commission (ASIC) raised concerns about the design and sale of its products.

Suncorp has also agreed to refund 41,428 customers a total of $17.2 million over products provided by MTA Insurance, which is owned by Suncorp.

The compensation will cover a range of products brought into question by ASIC and deemed to have little, if any, value.

ASIC stated some add-on insurances sold by MTA provided life cover to young people who were unlikely to need it, and others were unnecessary and duplicated other insurance policies.

Acting ASIC chair Peter Kell said the latest undertakings were part of one of the largest compensation programs achieved by ASIC, with more than $120 million in refunds to consumers.

"Our message to insurers is simple: the needs of your customers must come first in the design, price and sale of your products," Mr Kell said.

Swann Insurance, QBE, and Virginia Surety have already agreed to refund millions of dollar to customers over worthless add-on insurance premiums.

How add-on insurance works

What ASIC has been targeting is add-on products — often sold to people when they purchase a car and take out a loan.

One of the products called out by the regulator was Guaranteed Asset Protection (GAP).

GAP is designed to pay off the difference between the amount a customer owes on a car loan and the amount a car is insured for under comprehensive insurance, if the car is written off.

However, it was found customers who bought GAP products from Allianz or MTA Insurance were unlikely to be able to make a claim, because the insured value of the car was more than the amount left on the car loan.

One reason for this might be that a customer put down a large deposit when taking out the loan.

Both companies also sold consumer credit insurance (CCI) to young customers who were unlikely to need the cover. CCI usually covers some repayments on a customer's loan in the case of death or serious illness.

Insurers likely to face further questions in year ahead

Consumer groups have long raised concerns about these types of add-on insurance.

Susan Quinn, senior policy officer at the Consumer Action Law Centre, said the compensation scheme was just the beginning.

"We estimate that in recent years mis-sold add-on insurance would top $100 million each year. That's just in the car yards," Ms Quinn said.

She said she hoped the banking royal commission would properly investigate the actions of the insurance industry.

"The royal commission is an opportunity to shine a light on dark corners of the insurance industry," she said.

"The add-on insurance market has fallen far short of community expectations. This is happening not just in car yards but in banks and credit unions too."

ASIC's senior executive in charge of banking, credit and insurance, Michael Saadat, said it was too soon to say whether the watchdog would raise the issue with the royal commission.

"We are certainly on the record about this particular issue," he said. "We're here to assist the royal commission with whatever inquires it would like to make."

In statement, Allianz Australia said it had identified some policyholders who purchased cover that may not have been suitable.

The company said it would continue to work with ASIC and other insurers through the Insurance Council of Australia on further industry-wide reform.

A Suncorp spokesperson said MTA Insurance was working closely with ASIC to address its concerns.

Allianz is also making a community benefit payment of $175,000 to a financial literacy organisation. Suncorp is making a similar payment of $50,000, but did not specify where the money was going.

Original Article

LEAVE A REPLY

Please enter your comment!
Please enter your name here