ASIC has announced that two insurers, Allianz and Suncorp, have refunded insurance premiums to customers for car add-on insurance that ASIC believed was of little to no value. Background.

Allianz

ASIC has announced that Allianz (Allianz Australia Insurance Limited) will refund $45.6 million to 68,000 customers for add-on insurance sold through car dealerships across Australia between 1 December 2010 and 30 November 2017.

ASIC had a number of concerns about the design and sale of a range of Allianz add-on insurance products.

The refund program covers four Allianz add-on insurance products sold between 1 December 2010 and 30 November 2017:
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.

The program by Allianz addresses ASIC’s concerns with sales of the products where:

• It was unlikely customers would be able to claim on their MEI policy because the insured value of the car was more than the car loan (for example, because the customer paid a large deposit).
• The customer was unable to claim a payment under the MEI policy where their car was written off and they received a replacement vehicle from their comprehensive insurer.
• Customers did not receive rebates under their MEI policy when they paid out their loan early (which meant that their cover under the MEI policy had stopped).
• Customers were over-insured because they were sold a higher and more expensive level of cover than needed.
• Customers were sold a policy they would be ineligible to make a claim on.
• Life cover (under LPI) was sold to young people who were unlikely to need it.
• Customers were sold Warranties that they were unlikely to need because it would be seven years before they could make a claim (as the car had a manufacturer’s warranty for that period).

Suncorp

ASIC has announced that Suncorp will refund 41,428 add-on insurance customers $17.2 million for insurance bought through car dealerships that provided little or no value to consumers. The insurance was provided by MTA Insurance, owned by Suncorp.

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.

For the MTA Consumer Credit Insurance (CCI), ASIC found that the life cover was sold to young people who were unlikely to need the cover if they had no dependents.