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Add-on cover refunds pass $130 million

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The Australian Securities and Investments Commission (ASIC) has announced further repayments of $14.7 million for consumers sold “worthless” add-on insurance cover at car yards.

Following refunds announced last year, these payments bring the total value of remediation to more than $130 million.

Refunds announced last week are from Aioi Nissay Dowa Insurance Company Australia ($7.2 million), Eric Insurance ($3.37 million), Sovereign Insurance Australia ($1.37 million), Virginia Surety Company ($1.7 million) and LFI Group ($951,700).

Underwriting agency NM Insurance and three insurers – Hollard, AAI (Suncorp) and AIG – will also collectively refund $143,700.

ASIC says the repayments address concerns with guaranteed asset protection insurance, consumer credit insurance and mechanical breakdown cover (also known as extended warranty). The regulator says insurers were paying commissions as high as 80% to car yards, and many consumers were unable to claim, making some policies worthless.

Commissions have now been cut to 20%, and the value of claims paid compared to premium has increased. Some insurers have left the add-on market.

“ASIC will continue to monitor this sector to make sure the unfair practices of the past do not return,” Commissioner Sean Hughes said.

“However, the industry has a key role to play in this, too.”