Junk insurance days are numbered: Consumer Advocates
Following multi-billion dollar scandals in the UK and exposure of similar problems in Australia, the sale of Consumer Credit Insurance (CCI) products in Australia is finally being tackled by industry and regulators.
Consumer advocates say today’s announcement that ASIC will work with banks and consumer advocates to curb the mis-selling of consumer credit insurance (CCI) is an important first step.
Consumer Action Law Centre, CHOICE and Financial Rights Legal Centre are members of a new working group formed after an ASIC review found CCI was a ‘standout’ in customer complaints and that there was a high risk of people not understanding what they had bought.
‘The days of junk insurance in Australia are numbered. People are routinely pushed to buy CCI when they contact their bank about credit. It’s good to see the banks commit to stopping this pressure selling. But there is definitely room for improvement, particularly for online sales where people often don’t know what they’re buying,’ said Susan Quinn, Consumer Action Law Centre Senior Policy Officer.
“We look forward to working with ASIC and industry on bringing junk insurance to an end. It’s positive that everyone can see there’s an issue and is coming to the table with solutions. We’ll be standing up for the thousands of Australians who’ve been ripped off over many years” said Karen Cox, Coordinator of Financial Rights Legal Centre.
“Australians should be able to trust in the insurance they buy and the sales tactics used here break that trust. It’s vital that banks and the insurance industry act in good faith and fix this as soon as possible” said Erin Turner, CHOICE Head of Campaigns & Policy
The Australian Bankers’ Association have proposed to stop on-the-spot sales of CCI when people apply for credit cards in bank branches and over the phone. Banks will wait at least four days before they contact their customers to try to sell them CCI.
The consumer groups say separating the sale of CCI from the finance is an important step towards to reducing pressure selling, but they are calling for stronger reforms.
An end to CCI mis-selling—what advocates want
- Extend delayed sales requirements:
- To online sales: Online credit applications are increasingly the norm. People quickly apply for credit online, tick a box to buy CCI and don’t understand what they’ve just bought. Cooling off doesn’t work—a delay is a better way to stop mis-selling. Online sales have to be included in any reforms, or there’s a risk of building redundancy into the solution.
- To personal loans: Consumer advocates have seen numerous people mis-sold CCI with personal loans.
- Give customers control of the CCI sales process: Being contacted by sales people in outbound call centres is just another form of high pressure sales. Ideally it should be up to the customer to contact the bank if they want to proceed with an insurance purchase.
- Set clear measures of success: Setting claims ratio targets will help show if people’s experiences with CCI improve.
Media Contact: Jonathan Brown, 0413 299 567, email@example.com
Available for comment:
Karen Cox, Coordinator, Financial Rights Legal Centre
Susan Quinn, Senior Policy Officer, Consumer Action Law Centre
‘The banks process hundreds of thousands of credit applications each month—they really need to get this right.’ [source: CCMC, Own Motion Inquiry: Provision of Credit, Jan 17, p 12 – 380,879 credit applications in March 2016.]
The ABA previously rejected a recommendation of the Banking Code of Practice Review to introduce a one-day delay for CCI sales, and to require the customer to proactively contact the bank if they wanted to buy CCI.*
*Australian Bankers’ Association, Code of Banking Practice: Response by Australian Bankers’ Association to Review Final Recommendations, 28 March 2017, p 25.