In 2018, the Australian Securities and Investments Commission (ASIC) revealed that the largest banks in Australia have been misleading and stealing from consumers by selling worthless and unnecessary insurance products along with loans and credit cards are more commonly known as “junk insurance”. In many cases, this insurance offers costly coverage for things you don’t need, understand, or even realize you are paying for.
If you have taken out a loan or credit card, or even purchased a car on finance over the last decade, you might be unwittingly paying for this form of insurance as well. If that is the case, here are some of the most important things you should understand about junk insurance:
1. What junk insurance is?
Junk insurance is a broad term used to describe a wide range of add-on insurance policies that insurance companies and banks sometimes include in loans and credit cards. These policies aren’t cheap, often costing over $2000 per year, and many consumers get absolutely no real benefit from them. Even though “add-on insurance” is the official term for these products, they are known as “junk” due to their worthless nature and associated dodgy sales tactics. Junk insurance can come in several different forms, but the most commonly sold policies include Consumer Credit Insurance (CCI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Insurance (MBI).
2. Whether you’re paying for junk insurance
To find out whether you’re a victim of junk insurance, take a look at your old loan and credit card statements. Regular insurance payments could have been added to these accounts as well, meaning you might have also been paying interest. In case you haven’t kept your old statement, you have the right to contact your financial institution and request the statements be sent to you, after which you could go over the necessary details. Pay special attention to the language such as Consumer Credit Insurance (CCI), Guaranteed Asset Protection (GAP) Insurance, Extended Warranty Insurance, Mortgage Protection Insurance, Loan Protection Insurance, and Mechanical Breakdown Insurance (MBI).
3. Junk insurance is refundable
If you realize you have been paying for this form of add-on insurance unknowingly, it’s also important to understand how to get junk insurance back and get reimbursed for your troubles. The best solution might be to contact experienced claims specialists who will help you get a refund of the costs and interest charges on your junk insurance claim. Not only will such professionals be able to take care of the necessary paperwork and tedious legal procedures, but they will also keep you informed throughout the entire process and ensure you are updated from start to finish.
4. How junk insurance is sold
While some types of add-on insurance do serve a practical purpose, most junk insurance is quite worthless and unnecessary to consumers. Junk insurance can be incredibly expensive, but its high price isn’t the only issue. Salespeople often add junk insurance to loans and credit cards without fully explaining how it works, and without even informing consumers in some cases. This insurance is sold using deceptive, misleading, and unethical sales practices, which might explain why the reaction to the news surrounding junk insurance was so strong across Australia.
5. Who the worst offenders are
We rarely think that the most well-known and trusted insurance providers are capable of using unethical sales practices, as that reliability and confidence have been built over several decades of working together. However, even the largest insurers in Australia are guilty of selling junk insurance to their clients, from Allianz and ANZ to Westpac and CBA. Although the list of the worst offenders is quite lengthy, this fact only proves that consumers can never be too careful. Even if you’ve purchased insurance through a famous and established provider, it’s still recommended to carefully check your documents for junk insurance.
6. Active class action lawsuits
As investigations into junk insurance progressed, several law firms across the country have launched class actions against some of the largest providers. This is a type of legal proceeding where one person brings a claim against a respondent on behalf of a wider group of people. There are several ongoing class actions against junk insurance providers you could join. However, keep in mind that you will likely get around 9 cents per dollar paid in premiums through class actions. Opting out of them and pursuing a claim with a claims specialist could give you a better refund on junk insurance.
The junk insurance debacle represented an appalling situation, and stricter regulations are needed for ensuring the same mistakes don’t happen in the future as well. In the meantime, understanding junk insurance, staying informed, and claiming refunds are our best options.