ASIC conducted a review into the Add-on insurance industry in 2016 leading them to some troublesome findings. As a direct result of the ASIC review Swann Insurance is now issuing refunds to around 67,960 customers who purchased their add-on insurance through dealerships.
ASIC found that the insurance policies offered low payouts in comparison to the high premiums customers paid. They also identified the add-on insurance policies provided by Swann offered little or no value to the customers. ASIC stated the insurance provided little value because:
- some customers were unlikely to be able to make a claim as their car was insured for more than the amount they borrowed
- the cover under the GAP policy duplicated existing cover from comprehensive insurance policies
- customers were sold more insurance than they needed
- customers did not receive a rebate under their GAP policy when they paid off their loan early.
ASIC also found that the payouts for the insurance were much less than the sales commissions paid to car dealers for selling the add-on policies. Add-on insurance and extended warranties have been a natural part of the sales process for years in Australia and long been viewed by the public as just an up-sell. So ASIC’s findings may not surprise some however it is still amazing to see there are still companies providing products to consumers that have little to no value.
ASIC recommends that anyone seeking to purchase add-on insurance from a car dealer to first review their current insurance policy as you may already have the coverage being offered. And as always, if you’re not sure. Ask questions. If the policies or contracts are all in legal terms you don’t understand, ask questions, make notes on the contract so you understand.
It is one thing for ASIC to conduct this research, it is another to see action based on their findings. For this, ASIC has really done a good job for Australian consumers!