Consumer Action Law Centre has welcomed news that Allianz Australia Insurance will refund $400,016 to Australians who were sold its Consumer Credit Insurance alongside payday loans.
Consumer Action first raised concerns about the insurance products being sold alongside The Cash Store’s payday loans in June 2012 when one if its clients was sold insurance that she was unlikely to be able to use.
‘The insurance sold to our client included coverage for job loss, but she was unemployed. In fact, the only way she could have claimed on this insurance was in the very unlikely event that she suffered dismemberment, cancer, a stroke, a heart attack, catastrophic illness or died during the period of the two week loan,’ said Gerard Brody, CEO of Consumer Action.
‘Even then, the payout of a few hundred dollars would have been paid to The Cash Store, not our client, so the insurance benefited the lender rather than the customer.’
‘Overall 182,838 Allianz insurance products were sold through The Cash Store, but only 43 claims were paid out. Allianz should be embarrassed by that statistic and should be reviewing the practices of all third parties currently selling their add-on insurance products.
‘More broadly, industry data confirms that the payout for CCI is only around 23 cents in the dollar. That means the policies are very profitable for insurers, but offer questionable value for consumers,’ said Mr Brody.
Mr Brody warned that mis-selling of add-on insurance products such as CCI wasn’t limited to The Cash Store’s relationship with Allianz. ‘We see similar problems with junk insurance being sold through car dealers, where insurance or warranty products are sold to help the dealer earn commissions, even when the product isn’t needed or wanted by the customer.’
‘The worst cases we see are from customers who don’t even realise they’ve been sold the policy in the first place. Consumers are usually focused on the vehicle or the finance, rather than any associated insurance—and the sales process exploits that.
‘We’ve also seen a number of so called “discretionary risk products” sold which give the provider absolute discretion over whether or not it pays a claim. This means that you may not be paid, even if your claim falls within the terms and conditions of the warranty. It’s more rubbish that people don’t want and don’t need.
‘This recent episode with the Cash Store and Allianz should act as a warning to other insurers – keep an eye on who is selling your products and how they’re behaving, or you may find yourself out of pocket and with significant reputational damage,’ said Mr Brody.