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Allianz drops CCI after ASIC demands higher standards

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Allianz will no longer support consumer credit insurance (CCI), declaring the business is no longer cost-effective after a regulatory crackdown.

In a damning assessment of the product last month, the Australian Securities and Investments Commission (ASIC) set out tough new standards and insisted insurers drastically redesign their CCI policies, which carried claims ratios of up to 19 cents in the dollar.

“With further regulatory and industry changes expected, Allianz does not believe we can continue to provide cost-effective CCI products that meet our customers’ needs,” the insurer said in a statement last week.

ASIC had threatened to use its new product intervention powers to stop CCI sales and pursue court action against providers unless immediate and sustained improvement in the design and sale of the product was initiated.

The regulator outlined unacceptable sales practices and design in the CCI sold by major lenders, saying it has “consistently failed consumers”. It ordered 11 lenders providing CCI to undertake a remediation program for more than 300,000 customers, estimated to cost the companies at least $100 million.

After first raising concerns about CCI two years ago, ASIC detailed instances of the product being sold to consumers who were ineligible to claim or unlikely to need the cover or were sold policies under pressure.

Allianz’s withdrawal from the sale of all CCI products will be complete by the end of next month.