Refunds for unfair sales of add-on insurance

Can you claim a refund for insurance or a warranty sold to you by a car dealer?

ASIC has identified unfair conduct by a number of insurers who offer add-on insurance and extended warranties by car dealers or finance brokers. As a result, these insurers have agreed to refund over $120 million to customers who were sold these products.

But, even if you aren't eligible for these refunds, you may be able to claim a refund if you were unfairly sold one of these add-on products when you bought a car or motorbike from a dealer.

Here we explain the problems we identified with add-on insurance and warranty products, and how to get help if you think you were sold one of these products unfairly.

Can I claim a refund for add-on insurance?

You may be able to get a refund if, for example:

  • The sales person said you had to buy the insurance or the warranty to get the loan.
  • You weren't told about the products and they were included in the amount you borrowed without your consent.
  • You're not eligible to claim under the terms of the policy, even though you were told you could. For example, if you were working part time when you bought consumer credit insurance (CCI) you would not be eligible to make a claim. (Check your policy for details about what is and isn't covered.)

How do I know I've been sold an add-on product?

Check your insurance documents to see what products you were sold when you bought a car or motorbike. If you can't find these documents you can contact the insurer or warranty provider and ask them to send you a copy.

If you're not sure who the provider was, you can also check your loan contract. If you paid for the add-on product from your loan it should state who the provider is and how much you paid.

How do I get help if I have a complaint about add-on insurance?

If you bought add-on insurance and think the way the policy was sold to you was unfair, you should complain.

You can lodge a complaint by calling or emailing the add-on provider, or by lodging a complaint through their website. If you are not happy with their response, you can complain to the Financial Ombudsman Service (FOS) on 1800 367 287 or visit fos.org.au, if they are a member.

Most add-on providers are members of FOS, which is an independent body that can decide whether or not you are entitled to a refund.

However, some warranty providers, including car dealers, are not members of FOS. This means you will need to negotiate directly with the warranty provider.

For tips on lodging a complaint, see how to complain.

You can also receive information or help from:

What add-on products are sold through car yards?

There are many different types of add-on products that car dealers might sell you. These products fall into three categories:

  • cover for your loan payments if you, for example, die or become disabled or unemployed (consumer credit insurance and walkaway insurance)
  • cover for your loan payments if your motor vehicle is written off (GAP, motor equity, and shortfall insurance)
  • cover for repairs or damage to your vehicle (tyre and rim, extended warranties, and mechanical breakdown insurance).

See add-on insurance for more information about the insurance sold by car dealers, including the things to consider before buying this type of insurance.

Case study: Sally was sold insurance she did not need

Young Girl

Sally was 19 years old when she bought a $14,000 car from a dealer. The car was 8 years old and had done more than 200,000 kilometres.

When she bought the car, Sally was also sold cover to meet repayments on her loan if she became unemployed. The cover cost her $1,040.

However, she was not eligible to make a claim on the insurance as she was employed on a casual and a part-time basis (which meant she was excluded from the cover).

Sally was also sold life insurance for $595 to pay out the loan and allow her estate to keep the car if she died. However, she had no dependants or anyone who needed the car.

Why is ASIC concerned about add-on insurance?

ASIC's investigation found that add-on insurance often provides little or no benefit as consumers were sold insurance policies:

  • they could not make a claim on
  • that were unnecessary
  • that were more expensive, when a cheaper one would have met their needs
  • that had no or low value, because the maximum amount they could claim was less (or not much more) than the premium.

Sales commissions

ASIC also found that between 2013 and 2015 consumers paid $1.6 billion in premiums and received only $144 million in successful insurance claims (or 9 cents in the dollar), and that car dealers earned $602 million in commissions - over four times more than consumers received in claims.

High pressure sales

Add-on insurance and warranties are typically sold through car dealerships, when consumers are focused on buying a car. They've probably put a lot of time and effort into researching the car, but may not have considered or even heard of all the 'extra' insurance offered by the dealer.

This creates the opportunity for high-pressure or unfair sales tactics. It can also mean consumers are sold products:

  • without understanding what they are buying; or
  • because they are tired from making decisions about the car or the loan, and find it difficult to refuse to buy add-on products.

For more information, read ASIC's report: Buying add-on insurance in car yards: Why it can be hard to say no, which analysed the experience of consumers who are sold add-on insurance by car dealers.

For example, one consumer talked about the difficulty in having to say 'no' over and over again: "Every product was rolled out and every product I had to justify why I did not want to get it."

Case study: Tom is influenced by unfair sales tactics 

Car Salesman And Customer

When Tom was buying his car, the car dealer told him he would get a $500 discount on add-on products if he signed up for them on the spot. However, the discount was only available if Tom purchased a 'package' (or spent at least $2,000 on add-on products). Tom was given a voucher stating that he was entitled to the discount.

When Tom said he did not want to buy the add-on products he was asked if he was sure about his decision, as he would have to return the discount voucher if he didn't buy the insurance.

Tom didn't want to miss out on a discount, so he agreed to buy the insurance. This meant he was pressured into spending at least $2,000 to get a $500 discount.

Refunds being offered by insurers and warranty providers

ASIC has negotiated refunds with five add-on insurers or warranty providers, mainly where consumers were sold policies that had little or no value. For information on these, and to check if you're eligible for these refunds, visit our webpages:

ASIC has worked with lenders, insurers, car dealers and consumer groups to address the problems in the add-on insurance market. Over 200,000 consumers are being offered a refund for mis-sold insurance. If you think you were unfairly sold an add-on insurance policy when you bought a car or motorbike, you should complain.


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Last updated: 25 Jan 2018