AISC says there is “significant room for improvement” in the consumer credit insurance space after research found that consumers find the process costly and stressful.
Research found that consumers are not only unhappy with the service but the claim payments too.
Report 361: Consumer credit insurance policies: consumers’ claims experiences found that process of claiming on a CCI policy can be stressful and costly for consumers who are already experiencing significant events in their life like the loss of a job or illness.
While consumers whose claims were accepted were generally pleased to receive a benefit payment that assisted them, they were not always happy with their experience, because their benefit payment was less than they had expected, or payments were not made in a timeframe consistent with credit card repayment due dates.
The research identified that most consumers did not know how to make a claim or who to contact (often they contacted the entity who sold them their policy and not the insurer); most consumers did not make a claim promptly; and some consumers struggled with the claim assessment process which included completing long forms and providing documented evidence.
The regulator also found that the longer it took for a claim to be finalised the greater the financial impact on the consumer.
Consumers whose claims were denied generally felt that they were worse off for making a claim, given the time, money and effort they spent to complete forms and evidence their claim. Also, these consumers were often upset that they had been sold a policy without being made aware at the time that important exclusions and conditions on their policy could or did apply to them, and generally thought that if their credit card provider had offered them their policy then they must be covered.
ASIC said there is significant room for improvement on consumers' claims experiences for credit card-related consumer credit insurance (CCI). This includes cases where consumers received a payment or benefit under their policy.
ASIC deputy chairman Peter Kell said: ‘It is evident from the research that the more informed a consumer was at the time of purchase, the more likely they were to have a successful and positive claim experience.’
In 2011, ASIC released Report 256: Consumer credit insurance: A review of sales practices by authorised deposit-taking institutions (REP 256). REP 256 found that significant improvements could be made to sales practices. It made ten recommendations including ensuring customers have the product disclosure statement at the appropriate time.
Kell said the latest report confirmed the importance of the recommendations made in REP 256, which were designed to address poor consumer experiences.
“Industry has committed to adopting these recommendations, and we expect changes made as a result of our earlier work will already be leading to better outcomes for consumers,” he added.