Banking royal commission: Five insurers to repay $118m for 'junk' add-on car cover
INSURER Allianz does not believe it is responsible for the choices made by customers but is refunding $45.6 million to 68,000 people who bought “junk” add-on insurance through car dealerships.
Allianz and four other insurers, as a result of regulator action, are refunding more than $118 million in total to almost 213,000 people who bought add-on products from car dealers.
Allianz has told the banking royal commission its conduct, which was investigated by the Australian Securities and Investments Commission, fell below community standards.
The insurer admitted there were groups of dealer customers who may have obtained products that were not suited to their individual circumstances and remediation was required.
“While Allianz did not accept that it was legally responsible for choices made by customers, it accepted that some customer outcomes may not have met community standards and expectations,” its royal commission submission said.
Allianz agreed to refund 68,000 customers for add-on insurance that was of little or no value.
The issues included customers buying both gap and comprehensive insurance on new cars, when the full product included replacement cover.
Gap insurance pays the difference between the amount the customer owes on a car loan and the amount the vehicle is insured for under a comprehensive policy, if the car is written off.
Some customers who bought gap insurance also had no finance gap at the point of sale, while others purchased a higher level of gap or tyre and rim insurance than they needed.
The royal commission will on Tuesday examine add-on insurance sold through car dealerships using Insurance Australia Group as its case study.
IAG subsidiary Swann Insurance is refunding $39 million to 67,690 customers.
Suncorp is refunding $17.2 million to 41,428 customers, QBE $15.9 million to more than 35,000 people and Virginia Surety Company $330,000 to more than 500 customers.
ASIC found add-on insurance sold through car dealers is expensive, of poor value and provides consumers with very little or no benefit.
Add-on insurance products are designed to protect people if they become unable to meet repayments but consumer groups label them junk insurance that often provides little or no benefit.