EVER HAd a CAR LOAN or lease?
you could be entitled to $100s or $1,000s in refunds for junk insurance
Joel Gibson, Consumer Expert
have you ever had a car loan or novated lease?
If you have, you’ll know the drill: you agree on a price for the car, you get a quote for finance, and then there are all sorts of confusing ‘add-ons’ that the car dealer offers you.
Sometimes they don’t even seem optional. Sometimes they just toss them into the loan amount so it seems like they’re costing you nothing.
But we now know car yards have signed Australians up for millions of dollars in worthless ‘Junk Insurance’ over the past decade (sometimes without the customer even knowing).
WHAT A RORT!
Car buyers paid $1.6 billion in premiums in just 3 years from 2013-15
They received just 9c in the dollar back in claims (by comparison, car insurance can pay back 85c in the dollar!)
Meanwhile, insurers paid car dealers $602 million in commissions - more than 4 times what they paid to consumers in claims.
Source: ASIC investigation, 2016
It was a long-running rort exposed by the financial watchdog ASIC and the 2018 Banking Royal Commission.
And now YOU could be entitled to claim back thousands of dollars in pointless premiums, PLUS the interest you paid on those premiums if the insurance policy was added onto the loan!
And read on if you want to know all about how to get refunds for Junk Insurance on a Car Loan.
What's in this guide?
How do you know if you've paid for junk insurance on a car loan or novated lease?
Millions of us have signed up for car loans or leases in the past 15 years and paid for junk insurance as part of the package - often without realising.
FACT: Over the past 7 years, the big banks and major insurance companies have sold over 5.6 million policies for so-called “Junk Insurance” on credit cards and loans. That’s more than 1 policy for every 4 Australian adults.
When the watchdog lifted the lid on what was going on in Aussie car yards in 2013-2015, it was appalled.
ASIC found car dealers were getting paid up to 79% of the customer’s first-year premium as a commission for selling “add-on insurance”, but car buyers were claiming back just 9c for every dollar paid in premiums.
If you were one of millions who fell victim to this rort, there might be some evidence in your old loan statements.
You can request them from any financial institution and comb over the details, or you can ask Remediator to do the grunt work for you.
Of course, if you opt for the DIY method and you hit a wall of legalese and red tape, you can always get Remediator involved at that point and we’ll come to the rescue.
Some of the language to look out for includes:
Consumer Credit Insurance (CCI)
Guaranteed Asset Protection (GAP) Insurance
Loan Termination Insurance
Extended Warranty Insurance
Mechanical Breakdown Insurance (MBI)
Tyre & Rim Insurance
Scratch & Dent Insurance
Of course, sometimes it’s disguised or ‘branded’ differently.
If you’re confused by all the jargon, or you just want someone else to do the legwork, ask Remediator to take up the fight for you.
Unsure if you’re a victim? Contact Remediator for a free eligibility check
What is consumer credit Insurance (also known as cci)?
Consumer Credit Insurance (CCI for short) is meant to protect you if you can’t afford the repayments on your loan.
Let’s say you’ve bought or leased the car, then you can’t pay because you get sick, you have an accident, you’re disabled or you die.
Every CCI policy is different but they’re designed to cover at least the minimum repayments for a certain amount of time.
It sounds like a good idea but the numbers tell the real story.
The Royal Commission exposed how many of these policies were sold to people who were ineligible to claim. Pressure selling and unfair sales practices were often used too.
ASIC Moneysmart also says it might be unnecessary because you’re already covered. For example:
“Life insurance or income protection insurance covers you for sickness, injury and death. Home, contents or comprehensive car insurance may cover goods you buy that are damaged, lost or stolen.”
Nigel from Western Australia
"Remediator was able to obtain a full refund of premiums paid plus interest totalling $4,568 for mis-sold CCI and GAP insurance on a car loan from 6 years ago. I am very happy with the result."
What is Guaranteed asset protection (also known as GAP)?
Let’s say you have a car accident and you have $17,000 owing on your car loan, but your car is written off and your comprehensive insurance policy only pays out $15,000.
GAP Insurance is designed to cover the gap between what you owe under your car loan and what your car insurer will pay.
But for some people it’s useless: for example, if you do not have comprehensive insurance, then you should not have been sold GAP insurance. Also, for some car buyers, there is no “gap” to cover.
REAL WORLD EXAMPLE :
“A consumer bought a vehicle for $22,890. He traded in a vehicle with a value of $12,890, leaving a balance of $10,000 payable for the vehicle. He was sold a GAP insurance policy with a premium of $1,699, even though the loan was less than 50% of the purchase price of the vehicle. This means that the car would have to depreciate by over 50% immediately following purchase in order for its market value to be less than the loan balance, or for there to be a gap at the point of sale.” (ASIC)
The Royal Commission revealed that unfair sales practices were often used in the sale of this product too.
A similar product to CCI and GAP is called ‘Loan Termination Insurance’ - this covers the difference between what a consumer owes on their car loan and the market value of the car if they return it because they cannot make repayments due to illness or injury.
Carl from Queensland
"I got back $3,660 for mis-sold CCI and GAP insurance on a car loan from 7 years ago. I didn't realise that you could claim that far back.
Thanks to the team at Remediator !"
What is Tyre & rim Insurance?
This insurance covers the cost of repairing or replacing damaged tyres and rims from blowouts, punctures or other road damage.
That might sound sensible enough when you’re under pressure from a salesperson in a car dealership.
But how useful is it in practice? Again, the numbers tell the truth: This form of insurance has traditionally paid back just 8.6c in claims per dollar of premium paid, ASIC found.
Bhupinder from Victoria
"I got a refund of $1,356.51 for mis-sold Consumer Credit and Tyre & Rim Insurance on novated car lease from 7 years ago. I really appreciate Remediator's help."
A similar type of cover is called ‘Scratch & Dent Insurance’. This policy covers small repairs on your car that may not justify paying the excess on your car insurance policy.
Often it charges you an annual fee (e.g. $200) and then a small fee for each repair (e.g. $50).
WHat is extended warranty insurance ( also know as mbi or mechanical breakdown insurance)?
Extended Warranty insurance is where the consumer pays a fee in return for the warranty provider agreeing to repair or replace parts or components of goods in the event of defects or failures.
One problem with extended warranty cover is that it can be almost completely worthless on second-hand vehicles because it contains so many exclusions.
Australia’s Consumer Law contains protections for your rights when it comes to the quality of parts and therefore buying extended warranties is usually unnecessary.
Ever had a policy with any of these insurers?
The insurance companies that are now refunding Junk Insurance premiums include some of the best-known brands in the country - from Toyota Insurance, to QBE, MTA & Allianz.
The watchdog ASIC says the following insurers - which make up more than 90% of the market - are in the process of refunding premiums to some customers:
If you’ve had an insurance policy with any of these brands, you might be entitled to your money back. Some of the biggest sellers of Junk Insurance on car loans were lesser-known brands such as Swann Insurance, which featured heavily in the 2018 Banking Royal Commission.
Case study: Allianz
Allianz has refunded $45.6 million to 68,000 customers for ‘junk’ add-on insurance sold through car dealerships between 2010 and 2017.
This example shows how confusing it can be to try and locate junk insurances in your old statements because of each provider’s re-naming and re-branding:
Allianz ‘Motor Equity Insurance (MEI)’ was a type of Guaranteed Asset Protection (GAP) insurance.
Allianz ‘Loan Protection Insurance (LPI)’ was a type of Consumer Credit Insurance (CCI).
Allianz also sold ‘Tyre and Rim Insurance (TRI)’ and ‘Warranty Insurance’ products (Warranties).
As of 2018, other major insurance brands who had refunded customers included:
Suncorp: $17.2 million in add-on insurance premiums
Swann Insurance: $39 million in add-on insurance premiums
QBE: $15.9 million in add-on insurance premiums
Virginia Surety: $330,000 in add-on insurance premiums
How to avoid getting stung next time around
Car dealers must now wait until 4 days after the sale to ‘pitch’ you add-on insurance, thanks to the work of the 2018 Banking Royal Commission.
ASIC’s MoneySmart website has also created a MoneySmart Cars app that helps you work out the real cost of buying a car, including the cost of add-on insurance.
“This app warns consumers to think twice before buying add-on insurance as it may not be good value for money, paying a claim only in limited circumstances and adding to the cost.”