… and it’s no surprise. Transparency in insurance add-ons is often difficult to find. What are you paying for, does it actually add any benefit to your policy, and are you covered for what you need to be covered for? Using a broker circumvents these issues – we can discuss your needs with you and offer a policy which covers what you need covered, at competitive negotiated prices.
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Add-on insurance is becoming a significant issue being investigated by the royal commission on financial services misconduct.
Last week the Financial Rights Legal Centre told the commission it received about 7500 calls last financial year from consumers querying their insurance policies.
Most issues related to add-on cover and sales practices by car loan intermediaries, banks and other third-party distributors, the legal centre’s Co-ordinator Karen Cox says in a witness statement.
Common problems include consumers not realising they have consented to purchases, high-pressure sales tactics, unsuitable sales and add-on products that provide little benefit.
“A practice Financial Rights comes across frequently, and which compounds the effect of poor lending practices, is the sale of poor-value insurance products,” she says.
Such products include consumer credit insurance, guaranteed asset protection insurance, tyre and rim insurance and extended warranties.
“Probably the biggest thing consumers report is that, it’s kind of the opposite,” Ms Cox told the commission last week. “They don’t report it at all. They don’t even know they have a product.
“So we’re seeing a lot of people who actually don’t even realise they have an add-on product, which is a concern in itself.”
Meanwhile, Slater & Gordon is considering class actions against banks that sold credit card insurance to consumers who were likely to gain little or no benefit from the cover.
Class Actions Senior Associate Andrew Paull says cardholders may have paid tens of millions of dollars for seemingly worthless insurance, sold to provide cover if they become unable to meet repayments.
“The banks should know when this insurance is likely to be of no or limited value to their customers,” he said. “However, the evidence suggests they have continued to push these products widely and have collected millions in premiums while doing so.”
Those unlikely to benefit include people whose only income is from Centrelink, the self-employed, casual and contract workers, people with pre-existing medical conditions, retirees and holders of income protection insurance.
Some policyholders are unaware they have the insurance or incorrectly believe it is a requirement for obtaining a credit card.
Slater & Gordon says Australian Prudential Regulation Authority figures show 25% of consumer credit insurance premiums was returned through claims payouts last year, compared with an average of 74% for other types of insurance.
“The courts have previously found the sale of consumer credit insurance to those who are unlikely to be able to claim may constitute unconscionable conduct,” Mr Paull said.
A breach of the Australian Securities and Investments Commission Act may allow affected people to recover premiums paid in the past six years, he says.
source: Insurance News Australia