CommBank to refund over $10 million for improperly sold credit insurance
More than 65,000 Commonwealth Bank customers can expect a refund from the bank.
It hasn’t been a great week for Commonwealth Bank. Today, ASIC has announced that CommBank will refund approximately $10 million to over 65,000 customers after selling them unsuitable consumer credit insurance (CCI). This averages out to refunds of around $154 plus interest.
CCI is a form of additional insurance commonly sold with credit cards, personal loans, home loans and car loans. It protects credit borrowers in the case they’re unable to make their repayments if they become sick, injured or involuntarily unemployed. However, a few organisations have come under fire for offering applicants unnecessary or unsuitable CCI policies that they aren't eligible to take advantage of.
In CBA’s case, the bank sold CreditCard Plus insurance to 65,000 credit card customers who were unlikely to meet the employment criteria and would be unable to claim the insurance.
To be specific, CommBank will refund customers who were sold CreditCard Plus insurance between 2011 and 2015 and were either unemployed or studying at the time. This is because these customers were not eligible to claim the unemployment or temporary and permanent disability cover offered by the CCI. CommBank identified this issue in 2015 and self-reported it to ASIC. The company then began working with the government body on a remediation program.
CBA will also refund approximately $586,000 in premiums to around 10,000 home loan customers after it over-insured these borrowers for Home Loan Protection CCI taken out with a Commonwealth Bank home loan, leading to over-charged premiums.
CommBank isn’t the only institution to feel the wrath of ASIC because of improperly sold CCI. Earlier this month, QBE Insurance also confirmed that it would return roughly $15.9 million worth of premiums to more than 35,000 customers after ASIC raised concerns over add-on insurance products.
Both of these crackdowns come shortly after ASIC announced changes to CCI at the beginning of August. A Consumer Credit Insurance Working Group was launched at the end of July and is working towards a series of reforms to improve the outcomes of CCI in Australia. Some of these changes include prohibiting banks from selling CCI at the time of application and introducing new metrics to indicate the value a consumer will receive from CCI products.
ASIC’s deputy chair Peter Kell says it’s unacceptable that customers were sold insurance that didn’t meet their needs.
“One of ASIC's priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI,” said Kell. “Consumers should not be sold products that provide little or no benefit and banks should have processes in place that ensure this.”