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ASIC calls for action on CCI products

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Insurers should improve the value of consumer credit products and ensure they are offered only when there are clear benefits, Australian Securities and Investments Commission (ASIC) Deputy Chairman Peter Kell says.

The regulator has turned its focus to consumer credit insurance after enforcing refunds totalling more than $120 million for add-on products that offered little or no value and were sold through car dealerships.

Mr Kell says consumer credit insurance is often sold to consumers without their knowledge, when they are ineligible to claim or when they do not need it. They are also being overcharged.

ASIC has worked with lenders on sales of the products, with banks committing to better practices, including a deferred sales model for insurance sold with credit cards over the phone and in branches.

Mr Kell says more can be done, and he urges insurers to also review the value offered by their consumer credit insurance products.

“Insurers should move to implement similar changes to those being introduced for add-on insurance sold through car yards. Not doing so could be interpreted as a failure by the industry to apply lessons learned more broadly.”

Mr Kell says the industry needs to be more active in ensuring high standards among third-party product distributors and outsourced service providers.

ASIC is also moving ahead with a review of fraud investigation and surveillance practices, and will hold a workshop with consumer and industry representatives.

“It will provide a mechanism to develop solutions to address investigation practices that might also cause claimants to withdraw valid claims,” Mr Kell said.

The Insurance Council of Australia is considering investigation and surveillance practices and issues around product design and distribution in its review of the Code of Practice.

Mr Kell says it is up to the industry whether it seeks ASIC approval for the updated code, but acceptance would strengthen consumer confidence and provide an additional marker of quality. “The insurance code is a good code, an important code, and we think it is capable of meeting ASIC’s approval requirements,” he said.