James Greig, Supervisory Director of the Autorité des Marchés Financiers. Photo / Supplied
Around 200,000 users of credit card reimbursement insurance are being asked to check if they still need it after a review by the regulator found it offered poor value.
Insurance can be used to cover a credit card balance if a person is made redundant, ill or goes bankrupt.
But research conducted by the Autorité des marchés financiers has revealed that few people can claim insurance because of its many exclusions and many others do not claim because they have received little communication about the product. .
This meant that for every $ 1 paid in premiums by customers, only 10 cents was paid in claims, giving suppliers a very low loss rate of 10% and a high profit on the product.
The loss rate for health insurance was 80 percent and for life insurance it was 47 percent, according to the FMA.
Suppliers stopped selling the product a few years ago after concerns were raised about it in a joint Reserve Bank of New Zealand and FMA review of the conduct and culture of the industry. life insurance in 2019.
But about 200,000 New Zealanders still had these types of policies, with insurers earning about $ 20 million in premiums per year.
James Greig, FMA’s director of oversight, said New Zealanders should check to see if they have credit card reimbursement insurance – and if they still need it.
“We encourage customers to contact their supplier to see if this product is still suitable for them.”
Greig said some vendors have indicated that their insurance sales process involves customers “assessing for themselves” whether the product is suitable for them, based on product terms and conditions and information documents.
“This is unacceptable.”
The FMA report found that insurance providers were not doing enough to verify product suitability and had poor communication with their customers.
Consumers misunderstood the features and benefits of the products, with some not realizing that it was optional.
Providers also revealed a number of processes, systems and administrative failures, including incorrect premium billing and failure to cancel policies on demand.
In particular, the report found that insurance benefits diminished significantly when a consumer turned 65, with most benefits no longer applying, but consumers’ premiums were not reduced to reflect that.
ANZ New Zealand this year admitted violations of the Financial Market Conduct Act after the FMA alleged the bank billed some clients for CCRI policies that offered no cover or benefits, and claimed that ‘ANZ had broken the law by making false and / or misleading statements about the coverage offered. by these policies.
The New Zealand High Court ordered ANZ to pay a civil fine of $ 280,000.
The FMA said investigations into other vendors are ongoing.
“Some vendors have remedied or are remedying customers affected by any of these issues. The FMA will continue to engage with vendors to ensure this activity progresses and is a priority.”
The review covered 16 subscribers and distributors and involved the collection of qualitative and quantitative data between October and December 2020.
Suppliers included AIA New Zealand, ANZ NZ, ASB, BNZ, Cigna Life Insurance, Consumer Insurance Services Limited & Flexi Cards Limited (now Humm (NZ) Limited), Hallmark Life & General Insurance Company and Latitude Financial Services, Kiwibank, Kiwi Insurance , Southland Building Society, The Co-operative Bank, TSB Bank, Westpac Life New Zealand and Westpac New Zealand.