If you bought a car in the past eight years, you may be entitled to a refund of more than $650 for junk and add-on insurance which you were misled into purchasing.
The Australian Securities and Investments Commission (ASIC) has been systematically running its ruler over insurance policies sold by car dealerships and finance companies, claiming the benefits were misrepresented to buyers.
Among the insurers embroiled in the scandal are Allianz, Suncorp and RAA Insurance.
Earlier this year, then acting ASIC chairman Peter Kell said: “The refunds offered by Allianz, together with those from other insurers, make up one of the largest compensation programs achieved by ASIC, with over $120 million in refunds to consumers as a result of ASIC shining a spotlight on these poor consumer outcomes.
“Our message to insurers is simple: the needs of your customers must come first in the design, price and sale of your products.”
ASIC urges anyone who has bought a car since 2010 to check their contract in case they were sold insurance that was not fit for purpose. Its MoneySmart website has tips on how to work out the bona fides of any insurance you may have been sold, and the steps to take if you believe you are entitled to a refund.
You may be able to claim a refund if:
- the sales person said you had to buy the insurance or the warranty to get the loan
- you weren’t told about the products and they were included in the amount you borrowed without your consent
- you’re not eligible to claim under the terms of the policy, even though you were told you could. For example, if you were working part time when you bought consumer credit insurance (CCI) you would not be eligible to make a claim. (Check your policy for details about what is and isn’t covered.)
In the biggest single swoop of its kind, Allianz was forced to return $45.6 million in add-on insurance premiums to 68,000 customers. The refunds, which averaged $670 per customer, were for insurance of ‘little to no value’ sold through car dealerships across Australia between 1 December 2010 and 30 November 2017.
The add-ons were:
- Motor Equity Insurance (MEI) – a Guaranteed Asset Protection (GAP) insurance that pays the difference between the amount the customer owes on the car loan, and the amount the car is insured for under comprehensive car insurance, if the car is written off
- Loan Protection Insurance (LPI) – a type of Consumer Credit Insurance (CCI) designed to meet some of the repayments under a customer’s loan contract if they die, suffer a traumatic illness (such as cancer), or become disabled or unemployed
- Tyre and Rim Insurance (TRI) – that meets the cost of repairing or replacing a vehicle’s tyres and rims if they are punctured or suffer a blowout
- Warranty Insurance products (Warranties) – that provide cover for some repairs to a vehicle, once any manufacturer’s new vehicle warranty has expired.
ASIC said the issues with the add-ons included circumstances that precluded customers from making claims and drivers who were sold a higher level of cover than they needed.
In a separate case, Suncorp will refund 41,428 customers the $17.2 million they purchased through car dealerships for add-on insurance that provided little or no value, ASIC said earlier this year. The insurance was provided by MTA Insurance, owned by Suncorp.
The bank will refund about an average $415 to customers who bought the MTA Insurance between 2009 and 2017.
Late last year, other insurance companies were ordered to refund premiums to customers. They included QBE, Virginia Surety and Insurance Group Australia’s Swann Insurance.
Have you been offered add-on insurance cover by a car dealer? If so, did you buy it?