Insurance giant Allianz is set to refund over $8 million to thousands of customers who ASIC found were sold insurance policies for which they were either ineligible or highly unlikely to make a claim against.
ASIC revealed in a public statement that more than 15,000 of the insurer’s customers are entitled to refunds, as a direct result of its report Consumer credit insurance: Poor value products and harmful sales practices.
According to the regulator, the refunds relate to:
- the sale of policies to customers who were not eligible to make a claim for disability or unemployment.
- the sale of death cover to customers under the age of 21, who were unlikely to need such cover.
- the charging of fees to customers who paid their premiums by the month, without proper disclosures.
“The remediation program covers certain CCI (consumer credit insurance) products issued by Allianz including mortgage and loan protection policies sold through financial institutions,” ASIC said.
“These CCI products provided cover against the risk of consumers being unable to meet loan commitments because of death, injury, illness or involuntary unemployment.”
ASIC commissioner Sean Hughes said it was disappointing to discover “widespread mis-selling and poor product design”.
“This remediation outcome is only one of many examples where CCI has failed consumers. We expect insurers to cease to sell insurance products that provide little or no value,” he said.
“We need a financial system that is fair. Insurers and other financial institutions need to rise to the challenge and embed the principle of fairness into their businesses to ensure we do not see any further instances of this kind of poor-value product being pushed on to consumers.”
What the refunds cover
ASIC said that remediation, including refunds, from Allianz will include the following:
1. for ineligible sales of unemployment and disability cover:
- refund premiums charged plus interest for active, cancelled or lapsed policies sold between 1 January 2011 and 31 December 2018
- reassess all withdrawn and declined claims where the consumer was ineligible for the policy at the time of sale
- invite consumers to submit a claim if they have not already done so and pay valid claims plus interest
- continue to honour active policies and not rely on employment eligibility criteria as a basis to decline an unemployment or disability claim
2. for sales of death cover to customers under 21 years of age:
- refund all premiums charged plus interest for active, cancelled or lapsed policies sold between 1 January 2011 and 31 December 2018
- preserve existing death cover for active policyholders on current terms without charging for it
3. for monthly policy payment customers:
- refund all administration fees and loading charged plus interest
- correct any future direct debit amounts
The regulator also said that Allianz will stop selling CCI from 30 September 2019, while continuing to honour all existing policies.
Allianz expresses 'regret'; is 'supportive' of improving customer outcomes
An Allianz spokesperson provided a statement responding to the announcement, expressing its “supportive” stance on “all efforts to improve customer outcomes”.
“During 2018 Allianz undertook a review of its consumer credit insurance (CCI) products sold through Financial Institutions (FIs) which identified a number of customers who purchased mortgage and loan insurance but may not have been eligible to receive the full benefit of their purchased cover. Allianz promptly notified ASIC of its concerns and a comprehensive remediation approach has now been agreed,” the statement said.
“Allianz expects to refund in excess of $8 million (including interest) to more than 15,000 eligible customers who purchased Five Year Mortgage Repayment Insurance (MRI) and Loan Cover Insurance (LCI) between 1 January 2011 and 31 December 2018.
“We regret that in this instance some of our customers may have ended up with products that have not been entirely suitable and we are committed to a customer first approach and taking the necessary action to make this right. As such, we have decided to withdraw from the sale of all CCI products by the end of Q3 2019, and have already communicated this decision to our partners.”
It concluded: “We will continue to regularly review our product design, sales and claims processes to ensure they continue to meet our customer needs and expectations.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.