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

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.

These refunds, with interest, will amount to $39 million.

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'.

Swann will write to all affected customers by email or letter, with information about the refunds it is offering. Swann will be writing to consumers until 30 September 2018. Swann will make a community benefit payment after that date, based on the refunds that have not been claimed.

Customers with questions about their cover should contact Swann via phone:  1300 149 292, or by email: mailto:addon@swanninsurance.com.au

ASIC acknowledges Swann's cooperation in this matter.

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.

Background

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 identified concerns with Swann’s add-on insurance products as part of its ongoing review of the sale of add-on insurance sold through caryards. Swann is part of Insurance Australia Group.

Swann ceased offering add-on insurance products through caryards on 6 August 2016, and through motorbike dealers on 13 October 2017.  The changes in sales practices will not affect the services Swann continues to offer to existing policyholders, who can continue to make claims.

Other outcomes from ASIC's review include:

• Virginia Surety to refund over $330,000 to add-on insurance customers (refer: 17-189MR)
• QBE refunds $15.9 million in add-on insurance premiums (refer: 17-258MR)   

ASIC is working with insurers to see that improvements are made in the sale and design of add-on insurance products.  It has also consulted on the introduction of a deferred sales model to introduce a pause in the sales process.

Consumers can find out more information about the Swann remediation program 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.

Consumers who want to see if they have insurance with Swann can also check their loan contracts, which will state what add-on products were financed.

Editor's note 1:

Upon further analysis of the relevant data by Swann, the total refund pool was subsequently adjusted to $32.5 million in refunds to 64,187 customers.