Did I pay for Junk Insurance on my Credit Card?
You may have heard a lot about junk insurance in the media recently.
Junk insurance refers to add-on insurance sold to consumers on their loans or credit cards.
The most common form of junk insurance is consumer credit insurance (CCI). Consumer credit insurance is sold with credit cards, personal loans, card loans, home loans and novated leases.
Consumer credit insurance is an insurance product to protect you in the event that you cannot repay your credit card in the event of accident and illness, death, disability or involuntary unemployment. It is often charged as a monthly premium on your credit card.
Financial regulator ASIC reported on the sale of junk insurance by 11 major banks and lenders across eight years. It found that the way in which junk insurance had been sold was consistently unfair. One reason was that it could have been added without your knowledge.
Find out if you’ve been charged for FREE, here.
To identify if you’ve paid for junk insurance on your credit cards, you will need to check your monthly credit card statements.
Junk insurance can have several names. However, on credit cards it is often called something like the below:
- Credit Card Insurance
- CCI premium
- Credit Card Plus insurance
- Account Cover Plus
Why is consumer credit insurance junk insurance?
The Royal Banking Commission in 2018 found that consumer credit insurance was often low value to the consumers it was sold to. ASIC also found that banks sold junk insurance to consumers who were ineligible to claim or didn’t need the cover.
It also found that financial firms used pressure tactics or unfair sales tactics to get consumers to buy consumer credit insurance which was often attached to credit cards. The investigations still haven’t finished, and we are seeing many of the major banks such as CBA, NAB, Westpac and ANZ getting fined for the way in which they sold junk insurance to their customers.
Find out if you’ve been charged for FREE, here.
The big four banks are not the only financial institutions that were found to have sold junk insurance to consumers credit cards.
Some of the other lenders that may have sold junk insurance include:
Citibank
Bankwest
Latitude Finance
Bank of Melbourne
Bank SA
Suncorp
Find out how much you have been charged for FREE, here.
Is junk insurance still being sold on credit cards?
After ASIC’s review, many financial firms stopped selling consumer credit insurance on credit cards. This is because of the low value it provided to consumers. It was found to be low value because many people were either unable to claim on the policy or had their claims rejected due to the exclusions of the policy.
However, hundreds of thousands of Australians continue to pay for consumer credit insurance on their credit cards. If you are one of those people and you are unsure whether you should keep or cancel your insurance policy, you should speak to a financial counsellor or advisor.
Why is credit card insurance junk insurance?
There are many reasons why credit card insurance can be considered junk insurance.
ASIC found that between 2011-2018 consumers received only 11 cents in paid claims for every dollar paid in premiums. CCI sold with credit cards was found to be consistently the poorest value for consumers money.
- A high number of add-on insurance claims are denied, and this is the primary reason the insurance has become known as junk insurance. ASIC reviews found that on credit cards, claims ratios are extremely low. For example, Suncorp, Citigroup, ANZ, Latitude and Westpac (each had a claims ratio less than 12 cents);
- Junk insurance premiums are often extremely high, and the level of cover may be a lot less than the debt owing.
- You may not be able to claim because you are excluded.
If it’s junk, is it still being sold?
Most financial institutions stopped selling junk insurance after the Royal Banking Commission. However, if your credit card is still open, you may still be covered.
I found junk insurance, am I eligible for a refund?
If you have been sold junk insurance on your credit card, you may be eligible for a refund. Claimo are experts in junk insurance refunds and know all the reasons why you should get your money back.
