Three of the major banks have agreed to pay a total of A$126 million to settle class action claims alleging mis-selling of consumer credit insurance.
Law firm Slater and Gordon announced yesterday that ANZ will pay $47 million, Commonwealth Bank $50 million and Westpac $29 million to settle the actions.
The settlements, which are subject to court approval, are without any admission of wrongdoing by the banks.
In 2019, NAB and MLC agreed to pay $49.5 million to settle a class action claim, also brought by Slater and Gordon, over the same issue.
Slater and Gordon said in a statement: “Many customers may have been ineligible or were unlikely to be able to make a claim because they were already unemployed or had pre-existing health conditions or disabilities when they took out the insurance.
“Some may have never provided their consent to purchase the policies, were not informed that the insurance was optional or were not informed that they would be charged for it.”
It said as many as a million customers would receive compensation as a result of the latest settlements.
ASIC has reported on the failings of consumer credit and other add-on insurance for a number of years. In a 2018 report, it highlighted the following issues: • it was unlikely that customers would be able to claim on asset protection policies because the insured value of the car was more than the car loan (where the customer paid a large deposit);• customers did not receive rebates when they paid out their loan early (which meant that their cover under the policy had stopped);• customers were over-insured because they were sold a higher and more expensive level of cover than needed;• customers were sold a product they were ineligible to claim on;• life cover was sold to young people who were unlikely to need it;• cover was unnecessary as it duplicated existing cover held by customers, including under their comprehensive insurance policies; and• customers were sold cover for longer periods than they needed, for example, because the car was close to the kilometer limit at which cover would expire.
ASIC found that across all add-on insurance products it reviewed over three years, the gross amount returned to consumers in claims was only nine cents for every dollar of premium paid. By comparison, home insurance returns around 55 cents in the dollar.