Insurer refunds $39 million in premiums

Swann Insurance will offer to refund 67,960 customers $39 million paid for add-on insurance products bought via car and motorbike dealerships that were of low or no value.

ASIC Acting Chair Peter Kell said this large scale remediation sends a strong message to insurers selling add-on products.

“Add-on insurance has been under the spotlight because of significant problems with product design and sales. Insurers should be taking active steps to ensure their customers are not being sold products that provide little or no value.”

“ASIC’s work to fix add-on insurance through the car dealership channel is all about making sure customers are being sold insurance that meets their needs. Where customers have been sold inappropriate add-on products then remediation should be provided, and we are announcing a series of substantial remediation programs with insurers.”

The refund program covers six different add-on insurance products sold by Swann that:
•made payments towards the customer’s loan (the Loan Protection Insurance (LPI) Walkaway and Gapcover products)
•made payments if the consumer’s car was damaged (Purchase Price Protection Insurance, Tyre & Rim Insurance (TRI) and Mechanical Breakdown Insurance (MBI)).

The program includes refunds where:
•it was unlikely that the customer would be able to claim on the insurance as the insured value of the car was more than the amount borrowed (for example, because the customer paid a large deposit).
•the cover under the Gapcover policy was unnecessary as it duplicated existing cover held by customers, including under their comprehensive insurance policies;
•customers were sold a more expensive level of cover than they needed;
•customers did not receive rebates under their Gapcover policies when they paid out their loan early, even though cover under those policies had ended;
•customers were sold MBI for a longer period than they needed (for example, because the car was close to the kilometre limit at which cover would expire when the policy was sold);
•customers paid twice for roadside assistance, as they were sold this option under two different policies that were in force at the same time; and
•life insurance cover was sold to young people who were unlikely to need it.

In response to ASIC’s concerns, Swann will offer to:
•refund the premium paid by customers who claimed on their Swann comprehensive car insurance and obtained a replacement vehicle.
•partially refund customers who were sold more cover than they needed;
•refund the premium paid by customers for policies with little or negative value; and
•for customers who paid their loan off early, partially refund the insurance premium from the date the loan was paid off.

Along with earlier announcements made by ASIC in relation to QBE and Virginia Surety, the total amount of consumer remediation for add-on insurance sold through car dealerships now stands at over $55 million. ASIC expects to announce additional substantial remediation early in 2018.