The complete guide to getting your junk insurance refund
Joel Gibson, Consumer Expert
What is junk insurance, are you a victim, and how do you get a refund?
Over the past 7 years, the big banks and major insurance companies have sold over 5.6 million policies for so-called “Junk Insurance” policies on credit cards and loans. That’s more than 1 policy for every 4 Australian adults.
In many cases, the customer didn’t even know what they were signing up for.
The 2018 Banking Royal Commission exposed the enormous scale of this national scandal and highlighted the need for banks and insurance companies to refund perhaps billions of dollars in product fees, including “Junk Insurance” premiums, that they’ve wrongly sold over the years.
The good news? Many institutions have already set this money aside, waiting for you to claim it back.
The bad news? Many of us didn’t even know we were paying for it in the first place, so chances are we STILL don’t know we’ve paid for it - let alone how to reclaim it.
So billions of dollars of our hard-earned money could be sitting in bank and insurance company coffers, unclaimed.
Remediator was created to help you find out whether you’re one of millions of Aussies who are owed refunds for Junk Insurance premiums and to help you get it back.
Get your FREE eligibility check here if you haven’t already done so
And if you want to know more about Junk Insurance rip-offs, read on.
Bec from Queensland
"I received an insurance refund of $4,280 for mis-sold CCI on my car loan. I am very pleased with this result and I recommend Remediator's service to others"
What's in this guide?
WHAT IS JUNK INSURANCE?
“Junk Insurance” is an umbrella term used to describe a range of insurance policies that banks and insurance companies sometimes add to credit cards and loans.
It’s not cheap - some policies can cost over $2000 a year and you might get absolutely no benefit from them.
The official term is “add-on insurance” but they’ve become known as “Junk” for a range of reasons.
The other legalese you might hear is “mis-sold”, which can mean one of a number of things:
They might have signed you up without your proper consent or understanding. If you weren’t aware of the cover and what it included or excluded, chances are it was “mis-sold”.
They might have signed you up using dodgy sales tactics. The Banking Royal Commission highlighted that millions of us may have paid for policies which were sold using unfair sales practices and high-pressure tactics.
It might be entirely worthless to you: Often we’re not able to make a claim on these policies, even if we did know we had them! Some policies are double-ups of insurance we already have elsewhere, or they “cover” us for things that are automatically covered anyhow under consumer law, or we’re not even eligible for them for some reason.
Here are some of the most common examples:
1. Consumer Credit Insurance (also known as CCI)
Banks and insurance companies sold CCI along with their credit cards, personal loans, car loans and home loans.
It provides cover if you’re unable to meet your minimum monthly loan repayments due to unemployment, sickness or injury, or to pay an outstanding loan balance if you die.
CCI is optional and it’s usually sold to you when you apply for the credit card or loan - sometimes without you realising what you’re signing up for.
The Royal Commission exposed how many of these policies were sold to people who were ineligible to claim or unlikely to benefit or need cover. Pressure selling and unfair sales practices were often used too.
“The commissions paid to [car] dealers for the sale of add-on insurance products were as high as 79% of the premium [and] the amounts paid in commissions on these products exceeded the amounts paid out to customers who made claims.”
Banking Royal Commission Final Report 2019
2. Guaranteed Asset Protection (also known as GAP Insurance)
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.
If you do not have comprehensive insurance, then you should not have been sold GAP insurance.
The Royal Commission revealed that unfair sales practices were often used in the sale of this product too.
3. Extended Warranty Insurance (also known 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 is 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 not necessary.
HOW DO YOU KNOW IF YOU’VE PAID FOR JUNK INSURANCE?
Millions of Australians who have signed up for credit cards or loans in the past 15 years have paid junk insurance - often without realising.
FACT: ASIC is currently monitoring over $3.5 billion in remediations on mis-sold products and services, including junk insurance. This involves more than 3.6 million Australians (about 1 in 6 adult Aussies), and “there are [also] many other remediations that are dealt with by firms without any ASIC involvement”.
If you’re unsure whether you’re a victim of Junk Insurance, the clues could be in your old credit card or loan statements.
Regular insurance payments were usually added to the loan or credit card account, so you might have been paying interest on them too!
You can request your old statements 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 for includes:
Consumer Credit Insurance (CCI)
Guaranteed Asset Protection (GAP) Insurance
Extended Warranty Insurance
Mechanical Breakdown Insurance (MBI)
Mortgage Protection Insurance
Loan Protection Insurance
Once you identify a policy, you can either contact the financial institution and stake your claim for a refund, or ask Remediator to take up the fight for you.
Unsure if you’re a victim? Contact Remediator for a free eligibility check.
The other way to know if you might be a victim is to look at the list of insurance companies identified by ASIC and the Royal Commission as being involved in the mis-selling of junk insurance.
EVER HAD A policy with swann insurance?
Swann Insurance was owned by IAG, one of Australia’s ‘Big 2’ Insurance Companies.
Between 2008 and 2018, Swann Insurance:
Sold approximately 846,000 policies through car and motorbike dealerships,
Received approximately $1.07 billion in premiums, and
Paid out about 10% of that amount in claims.
The Royal Commission found that Swann “may have engaged in misconduct” in the way it designed and sold junk insurance and Swann itself largely accepted that it “failed to meet community standards”. This brand no longer sells these products and has repaid an estimated 64,000 customers to the tune of around $37 million.
In 2020, IAG settled a class action brought on behalf of former Swann Insurance customers for $138 million.
If you’re a former customer and you haven’t received a refund, contact Remediator so we can check if you’re eligible.
Swann is just one of a number of insurance companies that have refunded millions in premiums.
For example, following a 2016 report by the corporate watchdog, ASIC, on the sale of add-on insurance through car dealers they called on insurers to review and substantially improve the design and distribution of these products. ASIC have since identified the following insurers as ones that are in the process of refunding premiums to some customers.
EVER HAD A policy with any of these insurers?
Aioi Nissay Dowa Insurance Company Australia (sells Toyota Insurance)
NM Insurance (underwrites motorcycle insurance for The Holland Insurance Company, AAI (part of Suncorp) and AIG Australia)
watchdog scathing of car dealers selling junk insurance
When the ASIC looked at what was going on in Aussie caryards 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”.
The insurers were paying car dealers FOUR TIMES as much in commissions as they were paying out in claims to customers.
GAP Insurance was the worst, followed by Loan Termination Insurance.
This infographic below tells the whole story, it is from the 2016 ASIC report: REP 492 A market that is failing consumers: The sale of add-on insurance through car dealers.