Two homeowners have won a refund of their consumer credit insurance premiums after the complaints authority found the policy was inappropriately sold to them by a National Australia Bank agent.

The complainants said they bought the policy in March 2008 when they refinanced their home loan and following a conversation with the bank’s selling agent, who they said misled them. 

“I thought this [policy] was a requirement and part of the loan approval. I thought we had to pay this insurance to receive our mortgage loan, I was not aware this was an option,” one complainant said.

“If I knew more about the insurance, I would have declined, as we were never at risk of not being able to meet our repayments.” 

NAB argued the case fell outside the Australian Financial Complaints Authority’s time limits because the policyholders had been aware of the matter for six years. The policy was cancelled in September 2016, before the pair made their first complaint with the bank in 2022. 

However, the authority accepted the complainants would have been aware of the losses only following the Hayne royal commission’s final report in February 2019, and the matter fell within its time limits. 

NAB argued the policy was not mis-sold, saying the selling agent provided “appropriate” personal advice to the homeowners. It said the agent “would have considered a range of strategies for loan protection, which was the limited purpose of the advice”. 

The complaints authority questioned the bank’s view, noting its statement of advice was printed on a pre-filled form and the selling agent did not consider other insurance options when discussing the policy with the complainants.  

It also notes NAB’s 2005 National LoanCover product briefing shows there was a “directive” for agents to sell the product to each eligible customer. It says the documents “encouraged an environment of inappropriate selling, as the bank’s objective was to sell the insurance rather than consider whether the customers wanted the policies or if they were appropriate for each customer”.

AFCA says the agent “engaged in unfair sales practices” and NAB must refund the insureds’ premiums and any financial interest incurred.

The pair were also awarded $1000 for non-financial losses, because NAB did not adequately respond to their initial complaint.  

“I am not satisfied the bank made a genuine effort to deal with the complainants’ internal dispute resolution complaint in dismissing it by saying the product was sold under a general advice model,” the authority said. “The bank has not provided any explanation as to why it responded to the IDR complaint in this way when during the course of the complaint it agreed that the policy was sold following the provision of personal advice.”   

Click here for the ruling.