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AFCA finds against Allianz in add-on cases

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The Australian Financial Complaints Authority (AFCA) has made determinations against Allianz following two complaints about add-on insurance sold through car dealerships, highlighting issues around the use of medical records and high-pressure sales tactics.

AFCA ruled Allianz unfairly examined medical records dating back to a woman’s childhood before denying three disability cover claims for loan payments on a motor vehicle.

The woman, described as a vulnerable customer with a significant medical history, lodged the claims for benefits against her policy due to mental health conditions.

The first in April 2007 was for major depression, the second in 2009 was for schizoaffective disorder and the third in 2010 for bipolar disorder.

The policy provided cover for someone unable to work due to an injury or illness, with an exclusion if the insured had received treatment, or a reasonable person would have received treatment, for an existing condition in the preceding six months.

Allianz noted the woman had a documented history of mental illness, dating back to having been treated for depression as a child, and contended symptoms existed in the six months before policy inception on November 24.

The insurer says it is likely the complainant was aware she was suffering symptoms when she completed the insurance application because she reported work stress five days later.

Doctors' notes show that in March 2005 she was prescribed medication used to treat depression, with repeats for six-months, while clinical notes for November 28 2006 reference some stress at work but make no mention of symptoms or depression.

AFCA says there was no evidence she had suffered from or could be reasonably aware of any symptoms related to schizoaffective disorder or bipolar disorder until after the policy started, and no evidence of treatment for depression in the six-month period prior.

AFCA says “the insurer’s use of the catch-all phrase of ‘mental illness’ is concerning” and it had obtained the complainant’s entire medical file dating back to when she was three years old.

“While the insurer is entitled to investigate the complainant’s medical history, the panel accepts the complainant’s submission the insurer misused the complainant’s medical file,” it says. “This is particularly apparent considering the absence of information obtained relating to the relevant six-month period.”

Allianz was ordered to pay the complainant $11,800 to settle the claim plus $1500 compensation for non-financial loss.

AFCA has also ruled against Allianz in a dispute over purchase price insurance and loan protection insurance sold by a car dealership authorised representative in a high-pressure sales environment.

The complainant says the sales person never offered the add-on policies as an option and only asked what level of cover she wanted, while there was little information about the covers or time available to read the documents.

The woman, who was 20 years old at the time and taking out her first loan, says she was told she had to buy the policies because of “all the fees [she] would cop if [she] was to be unemployed”.

AFCA says there was no proof the representative’s sales practices were audited or shown to be compliant with training provided, and insurer site visit reports seemed to support a culture conducive for pressure selling.

“These reports were predominantly about performance, performance targets and incentives,” it says.

The ruling says on the balance of probabilities inappropriate and unfair sales tactics were likely employed to sell add-on policies that offered limited value or benefit for their price to the complainant.

Allianz was ordered to repay $4567.64 in premiums and finance interest incurred at an annual rate of 8.95%.

The insurer has ceased selling add-on purchase price insurance and loan protection insurance, which have been among areas scrutinised by the Hayne royal commission and the Australian Securities and Investments Commission.

The determinations are available here and here.