Consumer credit insurance (CCI) and gap insurance sold as “add-ons” to car finance and other credit have been dismissed as “rubbish products” that provide little or no value to consumers.

A damning report by the Consumer Action Law Centre – titled Junk Merchants – says add-on cover is often sold to people who are ineligible to claim or who don’t even know they have bought it, due to manipulative sales techniques.

CEO Gerard Brody says CCI pays out just 23 cents in the dollar – less than half what is paid out on home insurance.

“These products truly are junk,” he said. “Bundling of low-value insurance with a car or other loan takes advantage of Australians. Many people don’t even realise they’re purchasing the insurance because they’re focused on buying the main product.”

The report says high levels of commission are a “scandalous” problem.

It claims up to 65% of the premium paid for gap insurance goes to commissions, and CCI salespeople typically retain one dollar in every five.

“We’re calling for the insurance industry to make these products worth something or we’ll seek to have them banned,” Mr Brody said. “Conflicted remuneration has contributed to scandalous practices across financial planning and life insurance, and here it is again. High commissions drive this industry.”