An insurance product that has been deemed ‘useless’ has been pulled and policyholders refunded after regulatory bodies found it hugely ineffective.
Consumer credit insurance (CCI) was the offending policy, sold by The Cash Store (TCS) and loan company Assistive Finance Australia, Insurance and Risk Professional reported this month.
Following prosecution from the Australian Securities and Investments Commission (ASIC), last month, the Federal Court found the insurance cover to be less than effective and ordered the parties to pay penalties amounting to almost $19 million.
CCI is commonly a product that defends people from fees associated with missing payments through no fault of their own, and keeping their credit score intact.
The defending party sold more than 182,000 CCI policies with a value of more than $2.27 million, although only 43 customers have received a payout. In fact, policyholders collectively received a total of only $25,000 through claims on the product.
The court also found that TCS had sold the ‘useless’ CCI product to low-income customers, as well as breaching lending laws, for which the majority of the penalties were applied.
The CCI product was insured by Allianz between the periods of August 2010 to March 2011. During this time TCS collected more than $400,000 in premiums, which Allianz will refund after stating it had no knowledge of what was being sold.
“Allianz has acknowledged that the terms of the insurance, and the way in which the insurance was sold by TCS, were not acceptable,” Allianz Deputy Chairman Peter Kell explained.
“Allianz has cooperated with ASIC to resolve our concerns quickly, and provide refunds to consumers.”
The global insurer will now appoint an independent external firm to review the way it supervises third-party partners in the future.
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