The amount of refunds which insurers have been forced to make to customers for the sale of worthless add-on consumer credit insurance has exceeded A$120 million (US$96 million), according to announcements by the Australian Securities and Investments Commission (ASIC).
As part of the corrective programme, ASIC yesterday announced that Allianz and Suncorp have been forced to return a combined A$63 million to customers collected from insurance add-ons and financing sold through car dealerships.
ASIC announced that Allianz Australia will refund A$45.6 million to 68,000 customers for add-on insurance sold through car dealerships that were of little to no value. ASIC had a number of concerns about the design and sale of a range of Allianz add-on insurance products sold through car dealerships across Australia between 1 December 2010 and 30 November 2017.
Suncorp will refund 41,428 add-on insurance customers A$17.2 million for insurance bought through car dealerships that provided little or no value to consumers. The insurance was provided between 2009 and 2017 by MTA Insurance, owned by Suncorp.
In a statement, ASIC Acting Chair Peter Kell said: 'The refunds offered by Allianz, together with those from other insurers, make up one of the largest compensation programmes achieved by ASIC, with over A$120 million in refunds to consumers as a result of ASIC shining a spotlight on these poor consumer outcomes.”
He said that the large-scale remediation sent a strong message to add-on insurers. He said: “Add-on insurance has been under the spotlight for some time now. Insurers should be taking active steps to ensure their customers are not being sold products that provide little or no value.
“ASIC's work on add-on insurance is all about making sure customers are being sold insurance that meets their needs and if they haven't, are appropriately remediated.”
Other insurers that have been directed to make similar refunds in recent months include:
- IAG-owned Swann Insurance refunds A$39 million in add-on insurance premiums;
- QBE refunds A$15.9 million;
- Virginia Surety refunds over A$330,000;
- Hallmark General Insurance (trading as Latitude Insurance) refunds of approximately A$1.1 million.
- Commonwealth Bank refunds about A$10 million.
Add-on insurance products may be sold at the time of purchasing a motor vehicle. The add-on insurance may be connected to finance associated with the motor vehicle such as consumer credit insurance, gap insurance, walk away insurance, and trauma insurance.
In 2016, ASIC released three reports covering its review of the sale of add-on insurance through car dealers, which found that the insurance is expensive, of poor value and provides consumers very little or no benefit. ASIC is working with insurers to see that improvements are made to the sale and design of add-on insurance products.