A leading insurer has agreed to refund more than $400,000 in premiums it underwrote for a third party for what has been described as ‘useless’ insurance.
Last month, the Federal Court ordered payday lender The Cash Store (TCS) and loan funder Assistive Finance Australia to pay penalties totalling almost $19 million, after ASIC prosecuted them for failing to comply with consumer lending laws.
Most of the penalties relate to breaching responsible lending laws but the court also found that TCS had unconscionably sold useless consumer credit insurance (CCI) to low-income earners.
TCS sold more than 182,000 consumer credit insurance policies, worth more than $2.27m but only 43 customers received a payout, with claims totally $25,000.
Through a third party agent, Allianz was the insurer for the CCI product from August 2010 to March 2011, during which time TCS collected more than $400,000 in premiums. Allianz had no knowledge of what was being sold.
Deputy Chairman Peter Kell says Allianz has agreed to refund this amount and appoint an independent external firm to review how it supervises third parties.
“Allianz has acknowledged that the terms of the insurance, and the way in which the insurance was sold by TCS, were not acceptable,” he says.
“Allianz has cooperated with ASIC to resolve our concerns quickly, and provide refunds to consumers.”
Investigations into other entities involved with the product are ongoing.