The Australian Securities and Investments Commission (ASIC) has established a working group aimed at improving outcomes for consumer credit insurance.

The group, which includes banking industry representatives and consumer advocates, will progress a range of reforms, including a deferred-sales model for consumer credit insurance sold with credit cards over the phone and in branches.

Consumer credit insurance is a form of add-on insurance sold with credit cards, personal loans, home loans and car loans. It is promoted to borrowers to help them meet repayments if they lose their job, become sick or injured, or die.

However, the cover has been associated with poor consumer outcomes in Australia and overseas, including consumers purchasing it unwittingly and being ineligible to make claims.

Compared with other insurance products, consumers receive very little back in claims for what they pay in premiums.

Following discussions with ASIC, banks have committed to a range of measures to improve consumer outcomes in relation to consumer credit insurance. 

“Consumers should be confident that when they sign up for consumer credit insurance, they know what it is and that it suits their needs,” ASIC Deputy Chairman Peter Kell said.

“We welcome industry’s commitment to improve their sales practices and look forward to working with industry and consumer advocates on these initiatives.”