The Australian Securities and Investments Commission (ASIC) has revealed that the Commonwealth Bank of Australia (CommBank) sold CreditCard Plus insurance for credit card repayments to 65,000 customers between 2011 and 2015 who were either students or unemployed and were unlikely to meet the employment criteria and would be unable to claim the insurance.
CommBank will refund about $10 million to more than 65,000 customers after selling them unsuitable Consumer Credit Insurance (CCI). As a result of their status (either a student or unemployed) they wouldn't have been eligible to claim for unemployment or temporary and permanent disability cover provided by the insurance. Most customers were students with lower credit card limits.
CCI is a type of add-on insurance, sold with credit cards, personal loans, home loans and car loans. It is promoted to borrowers to help them meet their repayments if they become sick, injured or involuntarily unemployed.
The bank is also refunding approximately $586,000 in premiums to around 10,000 customers after it over-insured these customers for Home Loan Protection CCI taken out with a Commonwealth Bank Home Loan, resulting in the over-charging of premiums.
ASIC Deputy Chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs:
The bank had failed to adjust insurance premiums in cases where the final amount borrowed was less than the original loan applied for between 2007 and 2015, the regulator said.
ASIC has had a significant focus on add-on insurance products. In 2016, ASIC released three reports covering its review of the sale of add-on insurance through car dealerships, which found that the insurance is expensive, of poor value and provides consumers very little or no benefit.
ASIC will shortly release a consultation paper to consult on proposals in relation to add-on insurance products sold through car dealerships, including a deferred-sales model for this channel.
On 2 August 2017, ASIC announced thatwould also refund more than 35,000 add-on insurance customers up to $15.9 million they paid for insurance bought through car dealerships where the insurance provided little or no benefit.
The insurance products were QBE Guaranteed Asset Protection (GAP) and Consumer Credit Insurance (CCI) sold through car dealerships across Australia between 2011 and 2017.
ASIC found that the QBE GAP insurance:
GAP insurance covers the car owner for the difference between the amount they owe on the car loan, and the amount the car is insured for under comprehensive car insurance, if the car is written off.
CCI provides some cover to meet the repayments under a consumer's loan contract if they die, suffer a traumatic illness (such as cancer), or become disabled or unemployed. ASIC found that QBE CCI insurance was sold to young people who had no dependents and who were unlikely to need the cover. QBE will write to all affected customers and ask them to confirm they want a refund, rather than keeping the policy.
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Commonwealth Bank to refund over $10 million for mis-sold consumer credit insurance –
CBA to repay 65,000 customers about $10m for unsuitable insurance –
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