WESTPAC bank will offer more than 10,600 insurance customers refunds for premiums paid for cover they did not need.
Westpac had charged some customers for loan protection when they did not have a loan or did not want to be covered, the Australian Securities and Investments Commission said on Thursday.
ASIC in particular was concerned that Westpac may have been collecting insurance premiums before a loan was drawn down, after it had been repaid or where a customer did not go ahead with the loan.
Customers affected include those who took out a Mortgage Secure (MS) or Home Loan Protection (HLP) insurance policy when they applied for a home loan, ASIC said in a statement.
“These products were sold as consumer credit insurance (CCI) since 2002 and 2007 respectively, and were designed to provide a benefit in the event that the customer was not able to repay their home loan due to certain events occurring such as sickness or death,” the statement read.
“An ASIC surveillance uncovered that Westpac may have been collecting premiums from some customers for a CCI policy over a period when the customer did not have a home loan.”
ASIC was particularly concerned that Westpac had been collecting premiums for products “before a home loan was drawn down, after a home loan was repaid, or where a customer did not go ahead with a home loan”.
“It is important that a product is sold in a way that is consistent with what it is designed to do, in order to ensure that customers don’t pay for something they don’t need,” ASIC deputy chair Peter Kell said.
“In this case, Westpac customers may have been paying for insurance cover they did not need, either because it covered risks that were not present or risks against which they were already insured.”
Mortgage Secure was sold by Westpac Banking Corporation. Meanwhile, HLP was sold by St George, Bank of Melbourne and BankSA, all of which are divisions of Westpac Banking Corporation. Customers of RAMS Financial Group Pty Limited, which is part of the Westpac Group, may also have been sold HLP, according to ASIC.
Westpac stopped offering the MS and HLP products to new customers in June.
A Westpac spokeswoman told news.com.au the bank’s Mortgage Secure and Home Loan Protection policies were designed to cover death or illness regardless of whether customers had a home loan on foot.
So, even if the loan the insurance was taken out with was already paid off — or had not yet begun — they would still be covered as long as they paid their premiums.
“ASIC felt that some customers may not be completely aware of this fact, and we have been working with them since 2012 to come to this point,” the spokeswoman said.
“We are pleased that ASIC is now comfortable with our approach to communicating with customers to ensure that those who hold these policies understand how their insurance works and what they are covered for.”
She said customers who were considering a refund should weigh up their personal circumstances before doing so, including “whether comparable replacement cover is available to meet their needs”.
Westpac customers eligible for a refund are those who started paying premiums before they drew down on a home loan, after they repaid their home loan, or if they did not go ahead with the home loan and did not intend to be covered for that period, the spokeswoman said.
[Source:- the gurdian]