Allianz will refund $45.6 million to 68,000 customers and Suncorp will refund $17.2 million to 41,428 MTA Insurance customers for add-on policies, both of which were bought through car dealerships that provided little or no value to consumers.
The Australian Securities and Investments Commission said it 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. The Allianz refund programme will cover four Allianz add-on insurance products sold between the seven-year period. These were Motor Equity Insurance, a Guaranteed Asset Protection (GAP) insurance that pays the difference between the amount owed on a car loan and the amount the car is insured for if written off; Loan Protection Insurance (LPI), a form of consumer credit insurance; tyre and rim insurance; and extended warranties.
ASIC expressed several concerns with these products, including the unlikelihood customers could claim on their GAP policies because of these policies’ design, as well as customers being over-insured or not needing the policies they were sold. Life cover (under LPI) was sold to young people who were unlikely to need it, while customers were sold extended warranties they were unlikely to need because it might have been up to seven years before they could make a claim (as the car had a manufacturer’s warranty for that period).
MTA Insurance was pinged over its own GAP insurance policy offered to dealership customers between 2009 and 2017. Like Allianz, ASIC found it unlikely that the customer could claim on the insurance, because 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. ASIC also noted that the GAP policy cover was unnecessary as it duplicated replacement vehicle cover held by customers under their comprehensive car insurance policies, while customers were often sold a more expensive level of cover than they needed. Finally, 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.
Both companies will offer rebates as well as partial or full refunds depending on the policies customers held. Allianz will also make a community benefit payment of $175,000 to a financial literacy organisation, while MTA Insurance will make a similar payment of $50,000.
“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,” said Acting ASIC Chair Peter Kell.
“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.
“Our message to insurers is simple: the needs of your customers must come first in the design, price and sale of your products.”
ASIC said it acknowledged Allianz’ cooperation and Suncorp’s engagement in both matters.