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18-009MR Suncorp refunds $17.2 million in add-on insurance premiums
Suncorp will refund 41,428 add-on insurance customers $17.2 million for insurance bought through car dealerships that provided little or no value to consumers. The insurance was provided by MTA Insurance, owned by Suncorp.
ASIC found that for sales of MTA Guaranteed Asset Protection (GAP) insurance between 2009 and 2017:
- It was unlikely that the customer would be able to claim on the insurance, because, for example, they may have paid a large deposit on the car loan, so that the insured value of the car was more than the amount borrowed.
- The cover under the GAP policy was unnecessary as it duplicated replacement vehicle cover held by customers under their comprehensive car insurance policies.
- Customers were sold a more expensive level of GAP cover than they needed.
- Many customers did not receive rebates under their GAP policies when they paid out their loan early, even though cover under those policies had ended.
For the MTA Consumer Credit Insurance (CCI), ASIC found that the life cover was sold to young people who were unlikely to need the cover if they had no dependents.
In response to ASIC's concerns, MTA Insurance will:
- provide a refund to all customers sold GAP policies on new cars that remain in force as at 1 September 2017, with the amount of the refund depending on the premium paid by the consumer. Customers who receive a refund will not have their policy cancelled.
- offer to refund life and trauma insurance premiums to customers who were 25 years old or less when the policy was sold to them (unless they elect to keep the cover in place).
- provide rebates to GAP customers who repaid their loan early (where they also had a CCI policy).
- pay a $50,000 community benefit payment.
These refunds, with interest, will amount to $17.2 million.
ASIC Acting Chair Peter Kell said this large scale remediation sent a strong message to add-on insurers: 'Add-on insurance has been under the spotlight for some time now. Insurers should be taking active steps to ensure their customers are not being sold products that provide little or no value.'
'ASIC's work on add-on insurance is all about making sure customers are being sold insurance that meets their needs and if they haven't, are appropriately remediated.'
MTA Insurance started writing to affected customers after 15 January 2018. In the majority of cases MTA Insurance will send them a cheque. Customers with questions about their cover should contact MTA Insurance via phone: 1800 571 921, by email: email@example.com.
ASIC acknowledges Suncorp's engagement in this matter on behalf of MTA Insurance.
GAP insurance covers the car owner for the difference between the amount they owe on the car loan, and the amount the car is insured for under comprehensive car insurance, if the car is written off.
CCI provides some cover to meet the repayments under a customer's loan contract if they die, suffer a traumatic illness (such as cancer), or become disabled or unemployed.
AAI Limited (trading as Suncorp Insurance) acquired the MTA Insurance business on 29 August 2014. On 1 July 2015, the insurance business of MTA Insurance was formally transferred to AAI Limited under the Insurance Act 1973. The refund program covers sales both before and after the purchase of MTA Insurance by AAI Limited.
ASIC identified the issues with the MTA add-on insurance products as part of its ongoing review of the sale of add-on insurance through car yards that has resulted in refunds of over $120 million:
- Allianz refunds $45.6 million in add-on insurance premiums (refer: 18-008MR)
- Swann Insurance refunds $39 million in add-on insurance premiums (refer: 17-446MR)
- QBE refunds $15.9 million in add-on insurance premiums (refer: 17-258MR)
- Virginia Surety to refund over $330,000 to add-on insurance customers (refer: 17-189MR).
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:
- Report 470 Buying add-on insurance in car yards: Why it can be hard to say no.
- Report 471 The sale of life insurance through car dealers: Taking consumers for a ride.
- Report 492 A market that is failing consumers: The sale of add-on insurance through car dealers.
ASIC is working with insurers to see that improvements are made to the sale and design of add-on insurance products. It is also consulting on the introduction of a deferred sales model to introduce a pause in the sales process (refer: 17-280MR).
Consumers can also find out more details on the categories of sales where refunds are payable 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.