General insurer Virginia Surety must refund over $330,000 in insurance premiums to more than 500 customers.

ASIC has also imposed a condition on its Australian financial services licence for improperly selling consumer credit insurance policies.

Virginia Surety issues general insurance and sells consumer credit insurance in Australia through The Warranty Group Australasia Pty Ltd.

Between 18 June 2013 and 31 December 2015, Virginia Surety sold consumer credit insurance (a bundled add-on insurance product which includes general and life insurance cover), to customers taking out loans at caryards, mainly in Queensland and New South Wales.

The consumer credit insurance was promoted to cover the risk of the borrower being unable to make their repayments, due to sickness, injury, disability, death or unemployment of the borrower.

The matter was identified during ASIC’s review of add-on insurance sold through car dealers.

ASIC found that Virginia Surety had stated that the life cover in the add-on insurance policies was underwritten by TAL Life Limited (TAL), without TAL’s permission. This meant there was a risk that consumers would have a life claim rejected, even though they paid for the policy.

As a result, ASIC has placed a condition on Virginia Surety’s Australian financial services licence, so it has to:

  • Refund the life premium paid by affected customers plus interest
  • Engage an independent external compliance expert approved by ASIC, to review its compliance practices and report to ASIC.

ASIC Deputy Chair Peter Kell highlighted that customers should have the confidence that when they purchase an insurance policy, that they’ll be able to make a claim when they need to.

“The fact that Virginia Surety was selling this insurance without the life insurer’s approval, indicates serious deficiencies with its compliance. We have put all insurers in this market on notice that they need to change their practices and ensure they are properly considering the interests of consumers,” said Kell.

Where a consumer has a valid claim under an affected add-on insurance policy, TAL has agreed to honour the life cover and pay the claim, even though the customer will receive a refund from Virginia Surety.