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CBA said yesterday that it has decided to stop selling CreditCard Plus and Personal Loan Protection following a review of its consumer credit insurance products.
Incoming CEO Matt Comyn said the bank has concerns some customers who bought these products may not have been eligible to receive all of the employment related benefits.
“We have also sought consumer groups’ views on our concerns and they agree,” said Comyn.
CBA’s credit insurance is one of the case studies the royal banking commission is looking into at its public hearings on consumer lending next week.
Last week, commissioner Kenneth Hayne released a note rejecting CBA’s request not to disclose parts of evidence to be given by a CBA employee about CreditCard Plus.
The evidence refers to the bank’s communications with ASIC regarding CreditCard Plus, an add-on insurance policy sold with credit cards, personal loans, home loans, and car loans. CBA said in its non-publication application to the commission that those communications should be treated as confidential.
ASIC announced in August last year that CBA would refund over 65,000 customers about $10m after selling them CreditCard Plus. The regulator said the product was unsuitable for those customers.
“CommBank sold 'CreditCard Plus', insurance for credit card repayments, to 65,000 customers who were unlikely to meet the employment criteria and would be unable to claim the insurance,” said ASIC then.
It also said that the bank was refunding about $586,000 in premiums to around 10,000 customers after it overinsured them for Home Loan Protection insurance taken out with a home loan, resulting in over-charging of premiums.
CBA said yesterday that it has set aside approximately $16m for refunds, including interest, to an estimated 140,000 customers of its Personal Loan Protection and Home Loan Protection products.
“This follows a similar refund program which commenced last year for some CCP customers,” it said in a statement.
The bank said it will immediately start the process of withdrawing the products from the market and expects to complete it by 30 June.
It will continue offering its Home Loan Protection product to new and existing customers, while CreditCard Plus and Personal Loan Protection customers will remain covered under their policies.
“We’re working closely with ASIC to provide refunds to customers who may have been ineligible to claim some benefits due to their employment status at the time of taking out the policy,” said Comyn.
“While it is fundamental to the nature of insurance products that many customers who have them will not claim on them, and indeed they hope they won't, we need to ensure that they are at least properly eligible to do so.”
The bank said it is working with AIA – which is acquiring CommInsure life insurance business – to offer new protection solutions to its customers.
