Consumer credit insurance (CCI) provides cover for consumers if they are unable to meet their minimum loan repayments due to unemployment, sickness or injury or to pay the outstanding loan balance upon death. CCI is optional and usually sold by lenders to consumers with a credit card, personal loan or home loan.
ASIC has long been concerned about sales practices for CCI, which have resulted in poor outcomes for consumers. We reviewed the sale of CCI by lenders, for the period 2011 to 2018, and found that CCI sales practices and product design are still delivering poor outcomes for consumers.
This report confirms the standards we expect of lenders who sell CCI and insurers who design the products and handle claims. ASIC expects lenders and insurers to meet these standards or cease selling CCI until they do. New products must meet the standards before being sold.
ASIC has commenced enforcement investigations into a number of entities that have been involved in mis-selling CCI to consumers. We are also requiring lenders to remediate over 300,000 affected consumers with over $100 million to ensure that consumers who have not been treated fairly are appropriately remediated. ASIC will provide a further update on this program later in the year.
Our expectations in this report are supported by the recommendations in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission): see Recommendations 4.1, 4.3, 4.7 and 4.8.
Read Full Article here.