Westpac, ANZ targeted in ‘junk’ insurance class action

Westpac and ANZ sold ‘junk insurance to vulnerable customers’, alleges a class action filed against the big banks.

Westpac and ANZ sold “junk insurance to vulnerable customers” from 2011 to 2018 despite an ASIC requirement to review their practices, according to fresh class action claims against the banks.

The dual class actions, filed by Slater and Gordon, allege insurance policies were added to customers’ loans and credit cards without their consent, or being told it was optional.

The policies had “negligible” benefits for customers but generated hundreds of millions of dollars in revenue for the banks and insurers, the claims say.

The filings, lodged in the Victorian Federal Court on Friday, allege more than 40 per cent of claims made to ANZ on either credit card insurance or loan protection policies were declined by the insurer or withdrawn by the insured.

In one example, a woman who had been diagnosed with cancer was excluded from claiming on her policy due to a technicality.

Slater and Gordon claims the big banks continued to sell the products after ASIC released a report in 2017 requiring lenders to undertake a review of their insurance sales practises.

Between 2011 and 2018, ANZ paid out claims totalling just 6.9c for every dollar it collected in insurance premiums, according the filings. Comparatively, motor vehicle insurance pays approximately 85c for every dollar.

In addition, the two banks allegedly offered several loan products – including life and total permanent disability insurance products — despite being aware that the majority of consumers already held these insurance policies under their superannuation funds.

The class actions allege many customers believed they were required to take out the relevant insurance products to obtain the credit card or personal loan.

The allegations come just over a year after the banking royal commission, in which Justice Kenneth Hayne said that the banks had been motivated by greed and the “pursuit of short-term profit at the expense of basic standards of honesty”.

The four major banks — Westpac, Commonwealth Bank, National Australia Bank and ANZ — are now facing a total of 25 class actions.

Slater and Gordon practice group leader Andrew Paull said: “For too long, banks have abused their power by selling junk insurance products.

“The customers we’ve spoken with trusted the big banks. They were ripped off and continue to be out of pocket after being pressured to sign up to worthless insurance cover.”

Westpac told the sharemarket on Friday night it would vigorously defend the claims, which are seeking unspecified damages. ANZ declined to comment when contacted by The Weekend Australian.