Home / Daily / Regulation bites: Allianz cans CCI
7 August 2019
Allianz has dropped all its consumer credit insurance (CCI) business after a comprehensive review, saying it was no longer cost effective after a regulatory crackdown.
The Australian Securities and Investments Commission (ASIC) issued a damning assessment of the product last month, outlining unacceptable sales practices and poor design in the CCI sold by major lenders and saying it had “consistently failed consumers”.
The regulator set out tough new standards and insisted insurers drastically redesign their CCI policies, which carried claims ratios of 19 cents in the dollar. It ordered 11 lenders providing CCI to undertake a remediation program for more than 300,000 customers, estimated to cost the firms at least $100 million.
“With further regulatory and industry changes expected, Allianz does not believe we can continue to provide cost effective CCI products that meet our customers needs,” the insurer says in a statement issued today.
Allianz will withdraw from the sale of all CCI products by the end of next month.
ASIC had threatened to use new product intervention powers to stop CCI sales and pursue court action against providers unless immediate and sustained improvement in the design and sale of the product was initiated.
“ASIC expects lenders and insurers to meet these standards or cease selling CCI until they do,” it said.
The regulator first raised concerns about the way in which CCI was being sold two years ago.
In its report last month, ASIC detailed instances of CCI being sold to consumers who were ineligible to claim or unlikely to need the cover, plus pressure selling and unfair sales practices.
CCI providers were urged to provide proper benefit assessments, including payments for periods of unemployment rather than arbitrary limits, and unbundle CCI from credit cards so consumers can select cover they are eligible to use.
It said insurers should not charge premiums for CCI where primary benefits are no longer available, should provide annual communication about prices, limits and exclusions, and contact customers every two years asking whether they want to keep or cancel their cover.
Last September Allianz emerged battered and bruised from the general insurance hearings at the Hayne royal commission, after being put through the wringer over a series of errors allowed to remain on its website for up to six years. Eight months before that, the company was required to refund $45.6 million to 68,000 customers for add-on insurance sold through car dealerships that ASIC found to be of little to no value.