Westpac to refund premiums for unwanted insurance cover

Following an ASIC surveillance, Westpac will write to more than 10,600 insurance customers and will offer to refund any premiums paid for insurance cover they did not need. Westpac charged customers for loan protection insurance while the customer did not have a loan on foot and where the customer did not intend to be covered for that period.

4862722116_7d58b816c9_mCustomers affected include those who took out a Mortgage Secure (MS) or Home Loan Protection (HLP) insurance policy when they applied for a home loan. These products were sold as consumer credit insurance (CCI) since 2002 and 2007 respectively, and were designed to provide a benefit in the event that the customer was not able to repay their home loan due to certain events occurring such as sickness or death.

An ASIC surveillance uncovered that Westpac may have been collecting premiums from some customers for a CCI policy over a period when the customer did not have a home loan. In particular, ASIC was concerned that Westpac had been collecting premiums for these products:

  • before a home loan was drawn down,
  • after a home loan was repaid, or
  • where a customer did not go ahead with a home loan.

ASIC Deputy Chair Peter Kell said, ‘It is important that a product is sold in a way that is consistent with what it is designed to do, in order to ensure that customers don’t pay for something they don’t need. In this case, Westpac customers may have been paying for insurance cover they did not need, either because it covered risks that were not present or risks against which they were already insured.’

ASIC acknowledges the cooperative approach taken by Westpac in responding to our concerns.

Westpac will write to customers from late October 2015. If you are a MS or HLP customer and have any questions, you should contact Westpac on 1300 856 024 to discuss the matter.

Photo Credit: EssjayNZ via Compfight cc