THE nation’s biggest bank will refund customers $10 million worth of insurance they should never have been charged.
ASIC slammed the Commonwealth Bank’s “unacceptable” move to slap 65,000 people with premiums that would be unlikely to ever claim on.
Consumer credit insurance, a type of add-on insurance sold with credit cards, personal loans, home loans and car loans, is promoted to borrowers to help them meet their repayments if they become sick, injured or involuntarily unemployed.
But the Commonwealth Bank sold it to tens of thousands of customers who were unlikely to meet the necessary employment criteria for the policies, such as students and unemployed people, the regulator said.
In many cases, customers may not even be aware that they signed up and paid for the cover, which could be included in the fine print of their loan documents.
“They were therefore not eligible to claim for unemployment or temporary and permanent disability cover provided by the CCI,” ASIC said in a statement on Monday. “The vast majority of customers were students with lower credit card limits.”
The bank will also refund $586,000 in premiums to about 10,000 customers after it over-insured them for Home Loan Protection CCI taken out with a Commonwealth Bank home loan, inflating the cost of premiums.
ASIC deputy chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
“One of ASIC’s priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI,” Mr Kell said. “Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this.”
Consumer advocates have welcomed ASIC’s announcement, calling it “a big win” for customers sold “useless” insurance.
“This is why we call it junk insurance — it’s expensive and there are too many potential nasty surprises when you make a claim,” said Susan Quinn from the Consumer Action Law Centre.
“We’re talking about 75,000 people across Australia who will get their money back. But many more have bought junk insurance through banks, credit unions and car yards.
“We’re talking hundreds of millions of dollars a year. Now It’s time for this racket to come to an end.”
She said the centre had noted a rise in the number of people seeking to get their money back on unnecessary insurance and warranties through its DemandARefund.com website.
Today’s CommBank refund announcement follows ASIC’s recent announcements that insurer QBE will refund $15.9 million to people who bought CCI and GAP (guaranteed asset protection) insurance in car yards, and that insurer Virginia Surety will refund $330,000 in life insurance sold in car yards that had no insurer backing.
It comes as CBA chief executive Ian Narev prepares to stand down from the top job in 2018, after taking a 55 per cent pay cut in the wake of a tumultuous year for the bank, which despite record annual profits has suffered a string of controversies — including alleged breaches of anti-money laundering and counter-terrorism financing laws.