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15-318MR Westpac to refund premiums for unwanted insurance cover
Following an ASIC surveillance, Westpac will write to more than 10,600 insurance customers and will offer to refund any premiums paid for insurance cover they did not need. Westpac charged customers for loan protection insurance while the customer did not have a loan on foot and where the customer did not intend to be covered for that period.
Customers affected include those who took out a Mortgage Secure (MS) or Home Loan Protection (HLP) insurance policy when they applied for a home loan. These products were sold as consumer credit insurance (CCI) since 2002 and 2007 respectively, and were designed to provide a benefit in the event that the customer was not able to repay their home loan due to certain events occurring such as sickness or death.
An ASIC surveillance uncovered that Westpac may have been collecting premiums from some customers for a CCI policy over a period when the customer did not have a home loan. In particular, ASIC was concerned that Westpac had been collecting premiums for these products:
- before a home loan was drawn down,
- after a home loan was repaid, or
- where a customer did not go ahead with a home loan.
ASIC Deputy Chair Peter Kell said, 'It is important that a product is sold in a way that is consistent with what it is designed to do, in order to ensure that customers don’t pay for something they don’t need. In this case, Westpac customers may have been paying for insurance cover they did not need, either because it covered risks that were not present or risks against which they were already insured.’
ASIC acknowledges the cooperative approach taken by Westpac in responding to our concerns.
Westpac will write to customers from late October 2015. If you are a MS or HLP customer and have any questions, you should contact Westpac on 1300 856 024 to discuss the matter.
Mortgage Secure was sold by Westpac Banking Corporation.
HLP was sold by St George, Bank of Melbourne and BankSA, all of which are divisions of Westpac Banking Corporation. Customers of RAMS Financial Group Pty Limited, which is part of the Westpac Group, may also have been sold HLP. A consumer with a home loan from another credit provider could also obtain cover under HLP.
Westpac stopped offering the MS and HLP products to new customers in June 2015.
What is consumer credit insurance?
Consumer credit insurance is designed to protect borrowers in the event that they are not able to meet their loan repayments due to certain events occurring such as sickness, death or involuntary unemployment. CCI is usually sold at the time a home loan, credit card or personal loan is entered into.
ASIC's MoneySmart website outlines the questions consumers should ask before they take out consumer credit insurance.
Editor's note 1:
May 2016: ASIC can confirm that Westpac has written to nearly 8000 customers, resulting in the processing of refunds and cancellation of policies, where requested.