GE Money has given ASIC an enforceable undertaking to change its life insurance sales practices and compensate affected customers.
The undertaking is in response to ASIC’s investigation into insurance advice provided by Avco Financial Services which GE Money acquired in 1999. ASIC reviewed over 150 customers’ files. Following the review, ASIC was concerned about a number of GE Money insurance sales practices, including the following:
* GE Money had a practice of advising customers to take out Consumer Credit Insurance life cover (which would pay out the GE Money loan on their death) as well as a term life policy (which would pay a lump sum on death to the customer’s estate) when it would have been cheaper for the customer to take out one term life policy to achieve the same result;
* GE Money routinely advised customers, who were single and had no dependants, to take out life insurance to pay out the loan to GE Money when it was not clear that it was in the customer’s interests to do so; and
* GE Money might have recommended that customers take out more life insurance than they needed because GE Money:
o routinely did not take into account the level of customers’ superannuation savings;
o sometimes did not take into account life insurance cover that was part of customers’ superannuation; and
o sometimes recommended a higher level of insurance cover than the customer records suggested they needed.
* Where an existing customer sought further credit, GE Money’s practice was to provide a new loan package (incorporating the existing loan balance) and replace the existing CCI life policy with a new one. These customers were not told about the potential problems with this approach, including that if a health condition arose before the issue of the replacement policy, they might not be able to make a claim.
GE Money’s undertakings include that GE Money will:
1. stop recommending that customers take both CCI life and term life policies;
2. stop advising single customers with no dependants to take out life insurance to pay the GE Money loan, unless there is a clear benefit to the customer;
3. undertake a review, both internally and by an independent compliance expert, of its sales practices; and
4. offer compensation to affected consumers.
