How to get back money from 'junk' insurance policies

[Express]

How to get back money from 'junk' insurance policies


6 June, 2016

Esther Han
Consumer Affairs Editor


Working in travel insurance, Paul Quinn thought he knew insurance inside-out until recently, when he found out he had been sold a "junk" policy with his car loan.

He says that the salesperson led him to believe he needed "gap insurance" to get approval for the loan when he was buying his Toyota RAV4 five years ago. He forked out an extra $1090.

"But I didn't need it because I had comprehensive insurance, which covers the vehicle in the event of a total loss, and there was a reducing debt," said Mr Quinn.

"I wasn't ever going to benefit from it. It was worthless."

Mr Quinn is among the growing number of people successfully obtaining refunds for worthless add-on insurance products through Consumer Action Law Centre's Demand a Refund campaign, launched in March.



Too often add-on insurance is sold without the customer's knowledge or consent. Photo: Rod Clement


The campaign focuses on consumer credit insurance (CCI), gap insurance and used-car extended warranties that are sold with cars, credit cards and loans – sometimes without the customer's consent or knowledge.

Consumer Action chief executive Gerard Brody believes at least $350 million worth of consumer insurance alone has been sold to unsuspecting customers. All of this, he says, is potentially up for grabs in the form of refunds.

"[Consumer insurance] purports to cover you if you're unable to pay your loan. It's usually only available if, say, you lose your job, but we see it sold to people who don't have a job or are in casual work and wouldn't qualify," Mr Brody said.

"We're encouraging people to check their paperwork to see if they have any sorts of insurance with their loan or purchase of a car, and consider potentially claiming back their premiums."

Gap insurance is supposed to cover the amount left on a car loan if the car is written off or stolen and the comprehensive car insurance doesn't cover the cost in full. Often it's not needed.

Consumer Action says that, through its campaign, 70 people have demanded more than $150,000 worth of refunds. It's hoping to help many more.

A report from Australian Securities and Investments Commission earlier this year said it was concerned about the strong sales incentives to sell the products, with commissions as big as 75 per cent.

"Add-on insurance sold through dealerships can provide poor value cover and may cover relatively narrow risk, and some sales practices and processes may be unfair – and in some cases coercive," it said.

Mr Quinn sent a complaint to insurance giant Allianz, which said it would refund him the full amount because it couldn't locate the relevant paperwork.

When approached by Fairfax Media, Frank Grima, general manager at Toyota in the Sydney suburb of Mosman, where Mr Quinn bought the RAV4, said he believed the add-on product was "suitable".

"The dealership's process is to provide general information regarding products being offered and let the client decide for themselves. No client is ever forced into buying these products," he said. "Commissions for selling gap products are minimal to sales staff."

Through the Demand a Refund campaign, Bernadette Little obtained a $4300 refund from insurance company MTA for the gap and consumer credit insurance products sold without her consent when she bought a Honda Jazz.

The mother-of-two from the Gold Coast has used the money to pay off the car loan two years early.

The Insurance Council of Australia said the industry was examining and working to improve add-on insurance products to ensure they're fit for purpose.

"Well-established processes are in place for dealing with insurance disputes," an insurance council spokesman said, suggesting complainants contact their insurer or even the financial ombudsman.

"If consumers have any questions or complaints about their policy, they should first contact their insurer.

"If they are not satisfied with the complaints resolution process they may contact the Financial Ombudsman Service for guidance."

http://www.smh.com.au/business/consu...03-gpb0cb.html

[NTF6]

This is also a notorious practice with novated lease companies who will often include extended new car warranty, gap insurance and income protection insurance in the quote without advising the client that it is there.