The Australian Securities and Investments Commission (ASIC) is planning to intervene in the consumer credit insurance (CCI) sector after the release of a damning report today.

That report has uncovered multiple instances of CCI being sold to consumers who were ineligible to claim or unlikely to need cover, as well as pressure selling and unfair sales practices.

It has also found examples where consumers being provided with non-compliant personal advice.

Now ASIC says the 11 companies providing consumer credit must undertake a large-scale remediation program to repay more than 300,000 customers – an exercise expected to cost the companies at least $100 million.

And the regulator says it’s now also planning to ban unsolicited sales calls for consumer credit insurance.

The report concludes that CCI products are extremely poor value, with policyholders getting back an average 11 cents for every dollar paid in premiums for CCI with credit cards.

Lenders working in the CCI sector have already made changes to their practices. Seven of the eight lenders who sold CCI with credit cards have stopped as a result of ASIC’s investigations, while five out of nine lenders have stopped selling it with personal loans.

Total sales of all CCI products by lenders has declined by 71% between 2014 and 2018.

ASIC is warning that if it doesn’t see immediate and sustained improvement in the design and sale of CCI, it will use its new product intervention powers to stop their sale and pursue court action against insurers and lenders.

It wants a complete restructure of the CCI market in product design, compliance, and sales and post-sales practices, saying insurers should stop selling CCI products until they comply with ASIC’s standards.

The standards ASIC wants implemented include improved claims ratios, a proper benefit assessment, a halt to selling the product to ineligible customers, implementation of a deferred sales model for all CCI products and the need to obtain clear consent before discussing selling the product.

The Consumer Action Law Centre welcomed the report and called for immediate implementation of the reforms.

“We don’t need to give lenders more time to see whether they can be trusted to do this right,” Senior Policy Officer Cat Newton told insuranceNEWS.com.au. “They can’t be trusted, so we want to see ASIC use those intervention powers now.”

“Consumer credit insurance is such junk that the only way you can sell it is by using unfair and high-pressure sales tactics.”