QBE Insurance (Australia) Ltd (QBE) will 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:
- was sold where there was unlikely to be a gap between the insured value of the car and the loan balance, for example because the customer paid a large deposit
- duplicated existing cover held by consumers
- provided consumers with more insurance than they needed
ASIC found that QBE CCI insurance was sold to young people who had no dependents and who were unlikely to need the cover.
In response to ASIC’s concerns, QBE will:
- proactively refund the premium paid by customers who were unlikely to need GAP insurance, especially where they paid a large deposit
- proactively refund all GAP insurance customers at least one year’s premium because ‘new for old’ cover under their comprehensive motor insurance would have provided similar cover. Consumers can claim a larger refund if their comprehensive cover provided more than one year of ‘new for old’ vehicle replacement
- partially refund customers who were sold more GAP cover than they needed
- proactively refund customers under 25 years the cost of the life or trauma insurance element of their CCI premium
- for customers who paid their loan off early and held both GAP and CCI insurance, partially refund the GAP insurance premium from the date the loan was paid off
- make a $50,000 payment to Financial Literacy Australia
Together, these refunds, with interest, will amount to approximately $15.9 million.
‘This large-scale remediation by QBE is a direct result of our 2016 add-on insurance review, which uncovered the wide-spread sale of insurance with little or no value to consumers,’ Deputy Chair Peter Kell said.
‘We put all add-on insurers on notice following our review, and we welcome efforts made by QBE to address poor consumer outcomes.’
‘Insurance must meet the needs of the consumer first and foremost. All add-on insurers should review the sale of policies and refund consumers who were sold policies they didn’t need.’
ASIC recognises QBE’s responsiveness, and commitment to resolving our concerns. ASIC is working with other insurers to achieve similar outcomes where similar conduct occurred.
QBE will write to all affected customers and ask them to confirm they want a refund, rather than keeping the policy. Customers with questions about their cover should contact QBE via phone: 1300 022 509, email: [email protected] or on their website: qbe.com.au/addoninsurancerefunds.
Consumers can also find out if they are due a refund from QBE by visiting ASIC’s MoneySmart website. MoneySmart also has information about add-on insurance to help consumers work out if they’ll benefit from these products. Consumers can also download ASIC’s MoneySmart Cars app, which will help them avoid common traps and identify hidden costs when buying a car.
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.
In 2016, ASIC released three reports covering its review of the sale of add-on insurance through car dealers, which found that the insurance is expensive, of poor value and provides consumers very little or no benefit (refer REP 470, REP 471, REP 492).
ASIC is working with insurers to see that improvements are made in the sale and design of add-on insurance products.
ASIC will also shortly be releasing a consultation paper on add-on insurance, seeking feedback from stakeholders on possible changes to improve consumer outcomes (including a deferred sales model).