Refunds to be given for junk insurance

Add-on policies can be expensive and provide little benefit

The Australian Securities & Investments Commission (ASIC) recently announced that Commonwealth Bank and insurers QBE and Virginia Surety will repay over $26 million to people who were mis-sold add-on insurance, including consumer credit insurance. It has been a long time coming, and there may be more announcements on the way.

If you’ve taken out credit or finance, you may have been offered consumer credit insurance. It is typically added to your loan or credit card to cover some of your repayments if you lose your job, are injured, become sick or pass away. It’s just like being asked at the fastfood drive-through, “Would you like fries with that?”

The problem is that consumer advocates and ASIC have found add-on insurance is often expensive, low value and full of exclusions and conditions that surprise people when they try to make a claim.

Consumer credit insurance has been sold to people who work casually or part time, or are self-employed, and are ineligible to claim under their policies. It has also been sold to people who have pre-existing medical conditions that would exclude a claim. And it has been sold to people who already have similar insurance, often in their super, or who just don’t need the cover they are paying for.

Plus the benefits can often be much lower than people expect, and in some cases lower than the premium paid.

Add-on insurance might not be a great product but it is a boon for insurers, with $1.6 billion of policies sold between 2013 and 2015 just in car yards. This has been easy money for far too long. It’s time for insurers, banks and others selling junk insurance to repay their ripped-off customers and stop mis-selling it.

Consumer Action’s website (DemandARefund.com) has assisted people to claim more than $700,000 in refunds on add-on insurance (and extended car warranties) which they did not need or want. You could be one of thousands of people who can get a refund on junk insurance. To ask for a refund, head to DemandARefund.

Susan Quinn, senior policy officer, Consumer Action Law Centre