Suncorp will refund 41,428 add-on insurance customers $17.2 million for insurance bought through car dealerships that ASIC say provided little or no value to consumers, it was announced today. ASIC has repeatedly raised concerns about ‘add-on’ insurance, claiming that in many cases insurers were paying car yard staff big commissions to sell policies that were near useless to customers.
Other insurers are have also been refunding customers for add on insurance since December last year.
- Allianz refunds $45.6 million to 68,000 customers
- Swann Insurance refunds $39 million to 67,960 customers
- QBE refunds $15.9 to 35,000 customers
- Virginia Surety refunds $330,000 to more than 500 customers
In Suncorp’s case ASIC found that for sales of MTA Guaranteed Asset Protection (GAP) insurance between 2009 and 2017:
- It was unlikely that the customer would be able to claim on the insurance, because, for example, they may have paid a large deposit on the car loan, so that the insured value of the car was more than the amount borrowed.
- The cover under the GAP policy was unnecessary as it duplicated replacement vehicle cover held by customers under their comprehensive car insurance policies.
- Customers were sold a more expensive level of GAP cover than they needed.
- Many customers did not receive rebates under their GAP policies when they paid out their loan early, even though cover under those policies had ended.
Details of how the other insurance companies' policies were deficient can be found on the ASIC website.
In response to ASIC's concerns, MTA Insurance will:
- provide a refund to all customers sold GAP policies on new cars that remain in force as at 1 September 2017, with the amount of the refund depending on the premium paid by the consumer. Customers who receive a refund will not have their policy cancelled.
- Offer to refund life and trauma insurance premiums to customers who were 25 years old or less when the policy was sold to them.
- Provide rebates to GAP customers who repaid their loan early .
- Pay a $50,000 community benefit payment.
ASIC Acting Chair Peter Kell said this large scale remediation sent a strong message to add-on insurers: “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.”
Allianz will also make a community benefit payment of $175,000 to a financial literacy organisation.
Acting ASIC Chair 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.”