Finance Your Budget ‘Junk’ car insurance class action could affect thousands of motorists
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‘Junk’ car insurance class action could affect thousands of motorists

car-insurance
There could be nearly 740,000 claims captured by a new class action against Allianz's alleged "junk" car insurance policies. Photo: TND
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Tracy-Ann Fuller is one of thousands of Australians allegedly caught out by so-called “car yard insurance”.

The Melbourne woman was preparing to sign the contract for her new Holden Trax LTZ when, she says, she was “rushed” into buying a trio of add-on insurance products at the dealership – including one that claimed to cover tyre and rim damage.

Ms Fuller says the cost of the additional policies was nearly $6000.

But as they were bundled in with the rest of the paperwork, she thought they were an integral part of her package, she told The New Daily.

“Nobody told me that the products were optional – I thought they were part of the finance documents,” Ms Fuller said

In fact, nobody really told me much at all. I was just handed a bundle of documents an inch thick and told I would lose my deposit if I didn’t sign on the day.”

It was only when her car sustained damage that she believed she had been sold a furphy.

“When I tried to make a claim under my tyre-and-rim insurance for damage to my car rim and it was rejected. Then I realised it basically didn’t cover anything,” Ms Fuller said.

class-action-insurance
A new class action comes as the government considers new consumer protections against “high-pressure” car insurance sales. Photo: Getty

Now, Ms Fuller is the lead plaintiff in a class action brought against Allianz and Allianz Life by law firm Johnson Winter & Slattery (JWS) over the alleged sale of “junk” products, in what is claimed to be a breach of the Australian Securities and Investments Commission Act 2001.

The class action covers car and motorcycle customers who bought the following Allianz products through a dealership:

  • Loan Protection Insurance
  • Motor Equity Insurance (referred to as “GAP Insurance”, “Shortfall Insurance” or “Value Protect Insurance”)
  • Extended Motor Warranty
  • Tyre and Rim Insurance products.

JWS practice group head of dispute resolution Paul Buitendag said last year’s Hayne Royal Commission saw a number of complainants come out of the woodwork.

“While the Royal Commission is behind us, many consumers have significant claims and JWS has been instructed to file these important proceedings to take all steps available for the class to seek redress,” Mr Buitendag told The New Daily. 

JWS has confirmed drivers across Australia would be eligible to participate in the legal battle as group members.

And testimony handed to the banking royal commission suggest hundreds of thousands of motorists could be eligible.

Documents submitted by Allianz Australia chief general manager of retail distribution Michael Winter reveal at least 739,000 “add-on” policies taken out between 2013 and 2018 are potentially in question, totalling more than $600 million in premiums.

 

Allianz refunded $45.6 million to 68,000 customers who were sold insurance of “little or no value” as a result of an investigation by the corporate regulator, the Australian Securities and Investments Commission, in 2018.

ASIC declared add-on insurance products sold through car dealerships were expensive, of poor value and offered little benefit to consumers.

The firm admitted some dealer customers were sold products that may not have been suited to their individual circumstances.

While Allianz did not accept that it was legally responsible for choices made by customers, it accepted that some customer outcomes may not have met community standards and expectations,” the firm said in a statement to the banking royal commission.

An Allianz spokesperson said the firm acknowledged the new class action in relation to its add-on insurance products.

“In December 2017, ASIC approved an Allianz remediation program of premium refunds for any customers that may have purchased motor add-on insurance products that were not suitable for their needs,” she told The New Daily.

dealership
Hundreds of thousands of Australians have allegedly been sold “junk” add-on car insurance policies. Photo: Getty

“As this matter is now before the court, no further public comments will be made.”

Treasury last year released a proposal paper outlining reform for the sale of add-on insurance, which would introduce an “industry-wide deferred sales model (DSM)” to protect motorists from tactics including “pressure-selling, poor claims ratios and low levels of consumer engagement”.

The general insurance industry representative body, the Insurance Council of Australia, was among the respondents that support the introduction of a DSM.

While welcoming the new class action, Consumer Action Law Centre senior policy officer Cat Newton told The New Daily some motorists are still being stung by dealers with “junk” car insurance policies.

“We continue to hear from people who have been flogged junk insurance this year, particularly in car yards [so] to prevent ongoing harm, we need ASIC to intervene to stop the sale of junk insurance by car dealers,” Ms Newton said.

“Commissioner Hayne also recommended a ‘deferred sales’ model for all add-on insurance, whether it’s sold by a lender, travel agents or retail shops.

“This reform would give people time to consider whether they want or need the add-on insurance, free from high-pressure sales tactics motivated by eye-watering commissions.”

Those interested in signing up to the class action can find more information here.