Toyota has admitted to selling 'junk' insurance through its dealerships, it has been reported.
In a letter, Supplementary Product Disclosure Statement (SPDS) for Toyota’s novated lease insurance issued on 1 July, the automaker has in effect directly admitted to selling customers junk, News.com.au
In a new section titled “Risks,” Toyota Insurance warned customers of the risks they need to consider when purchasing insurance policies “in conjunction with financing agreements through motor dealers.”
It said “insurance purchased this way is often more expensive than similar cover purchased through other methods,” and “the types and levels of insurance provided may not be appropriate for you, especially if you have no dependants or already have insurance cover sufficient to meet your liabilities through other policies.”
It also acknowledged that “including the premium for insurance as part of the financed amount increases the real cost of the insurance due to the interest payable on the financed amount.”
Gerard Brody, Consumer Action chief executive, told News.com.au
the letter was “admitting that it’s junk.”
“We have raised concerns that the sales of this sort of insurance misleads people or takes advantage of them through the sales process,” he said.
“I think Toyota are trying to protect themselves by saying this is clearly disclosed at the outset. But in practice we know consumers rarely read complex and lengthy disclosure documents.”
The securities regulator issued two damning reports into the industry earlier this year, titled “Buying add-on insurance in car yards: why it can be hard to say no,” and “The sale of life insurance through car dealers: Taking consumers for a ride,” which exposed major issues with the practice of selling add-on insurance, News.com.au
The practice, which has been described as a “get rich quick scheme” for car dealers and finance providers has incurred Australians an estimated $70 million in losses, with some unaware they availed of the junk insurance in the first place, said Consumer Action Law Centre.
The advocacy group has been campaigning for consumers who have been sold junk insurance and warranties to complain and seek a refund, said the report. To date, there are more than $230,000 in refunds requested through the DemandARefund website.
The group is also lobbying for tougher laws. Brody said: “We’re hoping governments will intervene and change the law to prevent insurance being bundled with personal loans or other products in a way that people are unable to assess the value of the product.”
In a statement, a spokesperson for Toyota Finance Australia said: “We are aware of an article that has appeared today in relation to insurance add on products.”
“Toyota Finance Australia is committed to and ensures at all times that there is full transparency with regards to costs across all of its products, including its insurance product range.”
“Our customers are always and will continue to be our priority.”
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