A general insurer must refund more than $330,000 in premiums to more than 500 customers after mis-selling add-on insurance at car yards.

Virginia Surety stated a life cover component was underwritten by TAL Life – without TAL’s knowledge. This put claims at risk, according to the Australian Securities and Investments Commission (ASIC).

Between June 18 2013 and December 31 2015 it sold consumer credit insurance – a bundled add-on product including general and life cover – to customers at car yards mostly in Queensland and NSW, ASIC says.

The regulator has ordered the refund of life premiums, including interest, and imposed conditions on Virginia Surety’s financial services licence.

The insurer must engage an independent expert, approved by ASIC, to review its compliance practices and report to the regulator.

ASIC Deputy Chairman Peter Kell says the fact Virginia Surety was selling the insurance without the life insurer’s approval “indicates serious deficiencies with its compliance”.

“We have put all insurers in this market on notice that they need to change their practices and ensure they are properly considering the interests of consumers.”

TAL has agreed to honour the life cover and pay any valid claims, even though customers will receive refunds from Virginia Surety.