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ASIC maintains focus on credit insurance

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The Australian Securities and Investments Commission (ASIC) says it is continuing to investigate the suspected misconduct of “several entities” involved in the consumer credit insurance market, with a view to taking enforcement action.

But it has delayed some scrutiny as part of priority changes amid the coronavirus outbreak, after last July releasing Report 622 which set out expectations for lenders that sell CCI and for insurers that design and price the products and handle claims.

“Due to the COVID-19 pandemic situation ASIC has deferred work until later in 2020 on seeking assurances that minimum standards in REP 622 are being met, and compliance changes have been implemented and are working effectively,” it said last week.

“Importantly, and to ensure transparency, ASIC will still proceed to collect data from entities.”

The regulator last week announced the final tranche of a remediation program that has involved 11 banks and lenders.

The final payments of more than $32 million will see the total exceed $160 million, with remediation paid to some 435,000 customers.

“ASIC’s work has ensured these remediation programs are not only consumer-focused but also robust,” Deputy Chairman Karen Chester said. “It’s both unfair to consumers and ultimately costly to business to sell junk insurance.”

Since ASIC’s report last July all the lenders in its review are now no longer selling CCI with credit cards, personal loans or home loans, but hundreds of thousands of existing consumers continue to hold policies and pay premiums.

ASIC says its collection and publication of claims ratios will continue to ensure ongoing public transparency.

“Importantly, the forthcoming design and distribution obligations will mean that junk insurance like this will not reach consumers,” Ms Chester said.