A review of credit insurance products sold to consumers by banks and other lenders has found that consumers are being badly done by.
Conducted by the Australian Securities and Investments Commission (ASIC), the report Consumer Credit Insurance: Poor Value Products and Harmful Sales Practices, highlights the low value of consumer credit insurance (CCI) products and the unfair way they are promoted and sold to consumers.
The review, covering 11 major banks and other lenders, forms part of ASIC’s broader priority to address fairness to consumers and, in particular, harms, in insurance.
ASIC found that for CCI sold with credit cards, consumers received only 11¢ in claims for every dollar paid in premiums and across all CCI products sold by lenders, only 19¢ was recovered in claims for every premium dollar which consumers paid.
It also found consumers were sold CCI despite the fact they were ineligible to claim under their policy, and telephone sales staff used high-pressure selling and other unfair sales practices when selling CCI.
ASIC Commissioner Sean Hughes said consumers were given non-compliant personal advice to buy unsuitable policies and were incorrectly charged for CCI, including being charged ongoing CCI premiums even though they no longer had a loan.
“We are deeply troubled by the findings in our report,” Commissioner Hughes said.
“The stories they tell (are) of unfair practices occurring within Australia’s largest and most well-known financial institutions,” he said.
“Lenders and insurers have had more than enough time to improve sales practices and provide better value for consumers.”
He said an inevitable consequence of the widespread failings and poor selling practices would involve ASIC taking significant enforcement action against some of the entities named in the report.
ASIC’s 21-page report can be accessed at this PS News link.
