Allianz has agreed to appoint an independent external company to review its supervision of third parties and to refund people who bought consumer credit insurance from payday lender The Cash Store (TCS).

But the insurer says it is “extremely disappointed” at how the Australian Securities and Investments Commission (ASIC) has portrayed the issue, and insists the insurance was sold without its knowledge or agreement.

Accident & Health International (AHI), the cover’s underwriter, told insuranceNEWS.com.au it “acted at all times within the authority granted to AHI by Allianz Australia under Allianz’s underwriting agency agreement”.

The Federal Court last month imposed a record civil penalty of $18.975 million against TCS and its financier over breaches of the Credit Act and the sale of consumer credit insurance to people who would not be able to claim on the cover.

CGU bought 50% of AHI in July 2010 and took over renewals of AHI cover from Allianz on January 1 2011.

An Allianz spokesman says the TCS policies were sold three months after Allianz had accepted a July 1 2010 notice of termination from AHI “and continued for a few months after that relationship actually ceased on December 31 2010”.

“The consumer credit insurance policies sold through The Cash Store were designed and distributed outside of the authority granted to our agent and without Allianz being made aware that was being done,” he told insuranceNEWS.com.au.

ASIC says Allianz was the insurer between August 2010 and March 2011, when TCS collected $400,016 in premiums. Allianz has agreed to refund the premiums, although the spokesman says it received only about $100,000 of that sum.

The regulator acknowledges the insurer did not receive all the money.

ASIC is still investigating the sale of the insurance and the role of others in the case.

Allianz is understood to be pursuing AHI for about $300,000 in premiums paid but not remitted to the insurer.

TCS, which is in liquidation, sold credit insurance to more than 182,000 customers between August 2010 and March 2012.

Consumers paid total premiums of $2.28 million but only 43 claims were paid, totalling $25,118.

The Federal Court found the insurance was unlikely to be of any use to the consumers.

ASIC Deputy Chairman Peter Kell says Allianz has acknowledged the terms of the insurance and the way it was sold by TCS were not acceptable, and has co-operated with the regulator to resolve its concerns quickly and refund consumers.

Allianz has agreed to appoint an external company to review its supervision of third parties, to prevent a recurrence, he says.

AHI told insuranceNEWS.com.au it shares the court’s concern about The Cash Store and the unconscionable way it sold insurance.

“AHI is particularly concerned about the impact The Cash Store’s actions had on its customers,” it said. “AHI takes its responsibilities as a licensed insurance underwriting agency very seriously and we will work with the regulator to consider any appropriate steps we might take.”

See earlier story.