All shoppers need to be wary of junk insurance
Gerard Brody, CEO – Consumer Action Law Centre
As originally published in the Herald Sun 27/12/2017
Car yards, banks and insurance companies — we don’t need a Royal Commission to remind us that some pretty dodgy things have gone on in these places, but there’s one product that brings together some of the worst of all three.
“Add-on insurance” is the junk that gets added to your car loan or credit card when being swindled by a salesperson — you get insurance that gives you little to no value and they walk away with a hefty commission.
Last week one insurer — Swann Insurance — agreed to repay $39 million to people who had been mis-sold all kinds of add-on insurance in car yards. It takes the total refunds by add-on insurers in car yards and banks to more than $65 million, and the corporate cop ASIC says there is more to come.
This is big money but it’s no surprise to anyone familiar with add-on insurance and the tactics used to sell it.
A few years ago, Consumer Action Law Centre started noticing many people with problems with add-on insurance. These included people being pressured to buy expensive loan protection insurance, ticking a box to buy credit card “protection” insurance they couldn’t claim on, and people deceived into thinking the insurance was compulsory, or even tricked into buying add-on insurance without their knowledge.
This insurance added big costs to their loans. And numerous exclusions and conditions in the insurance policies made them useless to many people.
One woman specifically said she did not want GAP insurance with her car loan, as she had been sold it on her last loan — then she was sold it anyway.
Another woman was looking through her car loan documents before signing and questioned the add-on insurance. The car dealer encouraged her to stick with the insurance because otherwise he’d have to redo all the paperwork.
One man went into bank branch to get a personal loan, and came out with the loan — plus consumer credit insurance, home insurance and car insurance.
Now insurers have finally acknowledged the game is up.
The corporate cop is planning a forced delay between buying your car and buying add-on insurance. The aim is to stop dodgy salespeople pressuring you in the car yard, and give you time to consider the insurance offer. How the insurers sell add-on insurance through car dealers will be monitored.
The car yard clean-up is under way, but the banks aren’t taking their role in this problem seriously. ASIC is having a close look at how the banks sell junk insurance with loans and credit cards.
The Australian Bankers Association announced months ago that banks would delay the sale of add-on consumer credit insurance with credit cards in branches and over the phone, but excluded online applications and won’t stop doing it with personal and home loans where some of the most expensive rip-offs occur.
We think the banks should simply ask you a few basic questions to find out if you’re actually eligible to claim on this insurance, and make sure they do not sell it to you if you are ineligible
— but they’ve rejected this idea.
Add-on insurance is stealing hard-earned dollars away our families — those struggling this Christmas may have spent thousands on these products and not even know it. Car yards, banks and insurance companies need to own up to this racket and fix it now.
GERARD BRODY IS CEO OF CONSUMER ACTION LAW CENTRE