A homeowner who was inappropriately sold two consumer credit insurance (CCI) policies by an insurer's agent has won a refund of the premiums he had paid.

The complainant purchased the first policy in March 2016 in conjunction with a home loan before taking out a second one in February 2018 after he refinanced the loan and cancelled the initial policy. The policies were arranged through a loan officer employed by the insured’s bank, who acted as an agent for St Andrew’s Insurance (Australia).

The policyholder paid a $12,977 premium for the first policy and was refunded $4146 by the insurer when it was cancelled. The second policy’s premium amounted to $12,492, most of which was paid in a lump sum from the loan. 

The insured says the agent mis-sold him the policies by making him believe that he had “no option but to take them out as part of the home loan approval process”.

He also says the agent’s approach to selling the CCI policies “amounted to providing personal financial product advice”. 

St Andrew’s Insurance denied that its agent inappropriately sold the policies, noting documents including a checklist completed by the agent that confirmed he had advised that the CCI was optional and an application form that “clearly states the policy is not compulsory”.

The insurer also disputed that its agent provided personal financial advice, saying that its position for CCI policies was to offer them on a general advice basis. 

The Australian Financial Complaints Authority (AFCA) acknowledged that the policyholder signed documents that stated the policy was optional but said it “looked beyond the mere fact” and considered the insurer’s approach.  

It noted a statement from the agent in which he states he “identified a potential shortfall in [the complainant’s] current levels of cover” and “sought permission” to explain the benefits, features, and exclusions of all different levels of the CCI policy.

“My personal approach to selling the CCI policies for [the complainant] was to engage in a conversation whilst completing the assets and liabilities part of the application, which included superannuation and what cover of protection it provided to members in the event of loss of income through unemployment, illness or injury or death,” the agent said.

AFCA says the agent’s statement confirmed that he offered personal financial product advice to the complainant, contradicting the insurer’s position that it only provided general advice.

The ruling acknowledged that the agent provided a “verbal general advice warning” but did not accept that the warning fulfilled its intended purpose due to his “personal approach” to offering the policy, which had been contrary to the training he had received from the insurer.

“I am satisfied the insurer’s agent should not have provided any advice unless he could demonstrate the recommended CCI policies met a gap in the complainant’s existing insurance arrangements,” AFCA said.

“Clearly, if he did not provide the advice the complainant would not have agreed to the CCI policies.

“I am therefore satisfied the inappropriate financial advice was an operative cause of the complainant taking out inappropriate policies and agreeing to paying premiums from the home loans.”

The decision requires St Andrew’s Insurance to refund the premiums debited for the policies, plus interest, but subtracting the amount already refunded from the cancellation of the first policy. 

Click here for the ruling.