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Millions Still Owed by Big Banks for Junk Insurance Claims
Despite a deadline lapsing last year, it appears that the Big Four banks in Australia may still owe millions to consumers who purchased questionable insurance products. There is growing pressure to simplify the process for these consumers to reclaim their funds.
Nathan Mortlock, co-CEO of Claimo, a financial services firm that assists customers in pursuing compensation for junk insurance claims, highlighted that many have successfully claimed tens of thousands of dollars. He believes there are still untapped claims awaiting action.
“There are millions still outstanding,” Mortlock stated in a recent interview with Yahoo Finance, adding that 4.7 million Australians were affected by these products, but only a small number have come forward.
Background on Dodgy Insurance Products
For years, major Australian lenders such as Commonwealth Bank, NAB, ANZ, and Westpac sold consumer credit insurance as add-ons to various loans, including home, personal, and car loans as well as credit cards. These insurance products were marketed as protection against unforeseen hardships like job loss or illness. However, many consumers were left unaware of the product details, found themselves ineligible, or were misled into buying them altogether.
The return on these insurance policies was shockingly low, with banks often paying out just 11 cents on the dollar. This situation exemplified the predatory practices that were unearthed during the banking Royal Commission from 2017 to 2019.
For the past six years, Claimo has focused on investigating these junk insurance policies and securing refunds for affected individuals. The company advises consumers that they can still lodge complaints with the ombudsman, leveraging protections outlined in the National Credit Code.
Opportunities for Compensation
Before last year’s deadline, around 8,000 related claims were brought forth to the Australian Financial Complaints Authority (AFCA), with Mortlock noting that Claimo filed most of these as a significant wave of consumers sought recourse.
However, since that time, the number of claims has sharply decreased. “We had success rates of up to 80 per cent before the deadline. Post-deadline, the resolution rates from the major banks and insurers have plummeted to just 2.7 per cent,” Mortlock reported.
Claimer clients incur no costs if their claim fails, but the company retains 30 per cent of any successful payout as a fee for its services. Mortlock, a former employee of AFCA, has urged the ombudsman to clarify the options available to consumers still seeking compensation for junk insurance products.
“Technically, you can file a case, but many are being told it won’t be investigated,” he explained. “The public is being misled into believing these cases are time-barred, but we can pursue them under a different regulation.”
AFCA has indicated it will maintain its current rules, stating that the six-year timeframe is standardised across global financial sector ombudsmen. The expectation is that providers of junk insurance will process consumer complaints internally and issue refunds when warranted, or potentially face regulatory consequences.
Consumer Rights Still in Play
Consumers who have valid reasons for missing the deadline can still approach AFCA with their claims, especially if they can demonstrate special circumstances.
Nikola Araouzou, Claimo’s other co-CEO, emphasised that due to the financing of these insurance policies, many might still be able to pursue compensation, irrespective of what they’ve been informed about the deadlines.
“Although people have been told that the deadline has passed, the way most of these policies were financed should mean that the deadline is not applicable," she said. “We’re concerned that consumers with legitimate claims may lose confidence and forfeit their chances of getting their complaints adequately assessed.”
As Australia navigates the aftermath of these problematic insurance products, consumers are urged to take action and seek the compensation they may rightfully deserve. The landscape remains challenging, but it is essential for those affected to understand their potential options to reclaim their losses.
