Allianz Australia will refund more than $8 million to purchasers of consumer credit insurance (CCI) as the Australian Securities and Investments Commission (ASIC) cracks down on the mis-selling of poor-value and worthless products.

The insurer announced earlier this month that it will withdraw from the sale of all CCI products by the end of next month.

The refunds relate to mortgage and loan protection policies sold through financial institutions. They cover the risk of being unable to meet payments because of death, injury, illness or involuntary unemployment.

ASIC says consumers ineligible to make a claim for unemployment or disability and people aged under 21 who were unlikely to need death cover had been sold policies. The refunds also cover fees charged without adequate disclosure to customers who paid monthly.

“Disappointingly, our work on the sale of CCI has highlighted widespread mis-selling and poor product design,” Commissioner Sean Hughes said today.

“This remediation outcome is only one of many examples where CCI has failed consumers. We expect insurers to cease to sell insurance products that provide little or no value.”

Last year Allianz completed a review of CCI products sold through financial institutions and identified that a number of customers may not have been eligible to receive the full benefit of the purchased cover. The insurer said it notified ASIC of its concerns and agreed to remediation.

“We regret that in this instance some of our customers may have ended up with products that have not been entirely suitable and we are committed to a customer-first approach and taking the necessary action to make this right,” a spokeswoman told insuranceNEWS.com.au.

ASIC says the refunds, which include premiums, fees and interest, will be paid to more than 15,000 consumers and apply to active, cancelled or lapsed policies sold from 2011 to the end of last year.

Last month ASIC said 11 lenders providing CCI in Australia had been ordered to undertake a large-scale remediation program for more than 300,000 customers, with the cost to the companies estimated to reach at least $100 million.

“We need a financial system that is fair,” Mr Hughes said. “Insurers and other financial institutions need to rise to the challenge and embed the principle of fairness into their businesses to ensure we do not see any further instances of this kind of poor value product being pushed on to consumers.”

Allianz says it will continue to regularly review its product design, sales and claims processes to ensure they continue to meet customers’ needs and expectations.