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Thursday 21 December 2017

17-457MR Latitude Insurance refunds almost $1.1 million for poor consumer credit insurance sales and claims handling

Hallmark General Insurance Company Ltd (trading as Latitude Insurance) will provide refunds  of approximately $1.1 million to 905 customers after it mis-sold consumer credit insurance (CCI) with Latitude personal loans and incorrectly denied claims on CCI policies sold with Latitude and other credit cards.

CCI is a type of add-on insurance that provides some cover to meet the repayments under a consumer's loan contract if they die, suffer a traumatic illness (such as cancer), or become disabled or unemployed.                                            

Latitude Insurance identified and reported to ASIC that between October 2011 and June 2014, it sold involuntary unemployment insurance to personal loan customers who were ineligible to claim because they did not work the required minimum 20 hours per week.

It also identified that between May 2014 and February 2017, its new partly automated claims assessment process had incorrectly denied claims to credit card CCI customers, because it failed to properly apply the exclusion definition of 'casual employment.'

In response, Latitude Insurance will:

  • refund premiums and interest to personal loan involuntary unemployment insurance customers who were ineligible to claim. Customers also have the option to retain their policy and will not be subject to the minimum working hours condition for past or future claims.
  • pay claim amounts and interest to credit card CCI customers that had incorrectly denied claims.

Acting ASIC Chair Peter Kell said customers should never be sold insurance they won't be able  to claim on and that claims processes must be robust.

'Customers should always be confident that when they come to claim on their insurance, their claim will be properly assessed.'

Latitude Insurance will be contacting eligible customers. Latitude Insurance customers with questions or concerns should contact the Latitude Insurance Customer Service line on: 1800 800 230.

ASIC's MoneySmart website has useful tips for consumers so they know what to consider before buying CCI.

ASIC notes Latitude Insurance's cooperative approach in resolving this matter. 

Background

Hallmark General Insurance Company Ltd (trading as Latitude Insurance) is part of the Latitude Group which offers consumer finance and personal insurance in Australia and New Zealand. The Latitude Group includes Latitude Financial Services Australia Holdings Pty Ltd, Latitude Finance Australia and Latitude Personal Finance Pty Ltd.

ASIC is undertaking a broader review of CCI sales practices, see 17-255MR Banks to overhaul consumer credit insurance sales processes.
Recent ASIC outcomes in relation to CCI include:

  • Commonwealth Bank to refund over $10 million for mis-sold consumer credit insurance (refer: 17-268MR)
  • ASIC reports on Australian bank audits following Wells Fargo misconduct (refer: 17-254MR).
Last updated: 21/12/2017 12:00