The Australian Securities and Investments Commission (ASIC) has ordered Westpac to refund up to $8 million to clients who were sold loan protection insurance they may not have needed.

The banking group is writing to more than 10,600 affected customers, including those from subsidiaries St George, Bank of Melbourne, BankSA and RAMS Financial Group.

“We believe most of our customers will understand the cover and want to continue with it,” a Westpac spokesman told insuranceNEWS.com.au.

“For the few who do not, we will provide a refund… however, we don’t expect the actual amount refunded to be significant.”

ASIC surveillance showed the bank charging home loan customers for mortgage protection cover even when they did not have an active loan and did not want to be covered for that period.

In some cases Westpac collected premiums before a home loan was drawn down, after a home loan was paid and when customers did not proceed with a home loan.

The affected products – Mortgage Secure and home loan protection policies – have been sold as consumer credit insurance since 2002 and 2007 respectively.

Such products are usually sold when a client takes on a home loan, credit card or personal loan.

“It is important that a product is sold in a way that is consistent with what it is designed to do, to ensure customers don’t pay for something they don’t need,” ASIC Deputy Chairman Peter Kell said.

“In this case Westpac customers may have been paying for insurance cover they did not need, either because it covered risks that were not present or risks against which they were already insured.”