Millions of Australians could miss out on refunds from financial misconduct

Australia Broadcast Center

10-06-2025

Millions of Australians sold dud insurance with their home loans, car loans or credit cards may be entitled to compensation but a looming deadline of June 30 could see many miss out.
For decades, the big four banks, other lenders and insurers raked in billions from these policies, while paying out as little as 11 cents in the dollar, rendering these financial products effectively junk insurance.
The products, known as Consumer Credit Insurance and other add-on insurance products, became a symbol of the financial misconduct exposed during the banking royal commission.
They were routinely bundled with credit cards, personal loans, home loans and car loans. Sometimes with the false claim that the loan wouldn't be approved if the customer didn't take up the insurance.
The products were marketed as protection in the event of an accident, illness or job loss. But in too many cases customers didn't understand what they were paying for, didn't need the cover, or were ineligible to claim. Some were even signed up without their knowledge or consent.
The real scandal isn't just that these junk insurance policies were sold but that the industry got away with exploiting customers for so long.
ASIC launched an investigation into the products in 2011, issuing warnings and recommendations that went largely ignored as evidenced by the continued mis-selling of the products over the next few years. It wasn't until the fallout from the royal commission's final report in 2019 that things started to change.
To put the magnitude of the problem into context, over a 29-year period, it is estimated that more than 10 million add-on insurance products were sold in Australia, valued at billions of dollars, some believe it could be as high as $10 billion.
To date, claims have been refunded through a combination of class actions, internal dispute resolutions with the institutions and complaints lodged with the Australian Financial Complaints Authority (AFCA).
According to ASIC, insurers have repaid over $270 million to customers who were mis-sold add-on car-yard insurance and CCI.
It means billions of dollars is potentially still unclaimed by millions of customers.
But that is now at risk.
AFCA, the industry-funded external dispute resolution service, has imposed a final deadline of June for customers who were sold these products before July 2019 to lodge a claim. Originally set for February 2025, the cut-off was extended earlier this year.
The deadline is based on AFCA's position that the banking royal commission, which handed down its final report in February 2019, should have alerted consumers to the widespread problems with add-on insurance. As a result, AFCA argues that most people should have been aware or reasonably aware of the issue from that point.
The six-year limit reflects AFCA's standard rule for complaints: that they must be lodged within six years of the consumer becoming aware or reasonably expected to have become aware that they suffered a loss.
In this case, AFCA is effectively using the royal commission as the trigger for starting that six-year clock.
With less than three weeks to go before the deadline, there are growing fears that thousands, possibly millions of Australians with legitimate claims may miss out because they don't know they are eligible.
A similar insurance scandal rocked Britain, where more than 60 million add-on insurance policies were sold between 1990 and 2010. Like in Australia they were bundled with loans, credit cards or mortgages, and sold to people who didn't need or couldn't use them.
It culminated in financial institutions being forced to repay an eye-watering £48 billion ($99.5 billion) to customers, making it the largest insurance scandal and redress scheme in UK history. The product at the centre of it all, Payment Protection Insurance (PPI), became a household term for financial misconduct.
The UK's financial regulator, the Financial Conduct Authority (FCA), ran a high-profile public awareness campaign that included TV ads, urging people to check if they were eligible for refunds. The FCA eventually set a final deadline of August 2019, nearly a decade after the scandal came to light.
In 2017, two years before the final cut-off, the UK regulator launched an additional national campaign to raise awareness about the looming deadline for claims.
The campaign featured a robotic model of Arnold Schwarzenegger's Terminator head urging people to act, with the now-famous line: "Make a decision. Do it now." The ad, funded by 18 of the worst-offending banks, building societies and credit card providers, ran across TV, radio and digital platforms, which helped get the message out.
In stark contrast, Australia's deadline has arrived with little fanfare.
Consumer Action Law Centre's chief executive said junk insurance, by its nature, is hidden, harmful and of poor value and the policies wrongfully enriched corporations at the expense of customers.
"Even today, there are people becoming aware of their right to a refund of junk insurance premiums," she said.
On AFCA's June 30 deadline, she said many affected customers very likely didn't watch the royal commission, or read their loan documents closely enough to know they were entitled to a refund.
"There will be more becoming aware of their rights down the track," she said.
Tonkin said if only a few people are claiming, there's no need for a strict deadline. But if lots of people are still coming forward, it shows the problem hasn't been fixed and should be extended.
"At the very least, AFCA should retain a discretion to allow claims, particularly for consumers experiencing vulnerability," she said.
And she said it should be incumbent on banks and other lenders that profited from junk insurance policies to be identifying customers who are entitled to a refund.
The founder of financial refund service Claimo, Nathan Mortlock, estimates more than 5 million Australians were sold add-on insurance, estimated at more than $17 billion.
Claimo has been processing thousands of claims for potential victims of add on insurance. Since A Current Affair aired a story last November about the looming deadline, Claimo said it has received almost 50,000 new enquiries.
"That surge proves Australians were not previously aware. If they were, they would have come forward in 2019," he said.
Some claimants received anything from a few thousand dollars to more than $20,000 with Claimo taking a 30 per cent cut.
All up it has 70,000 cases, worth an estimated $67 million.
"Millions of Australians may miss out on compensation they're legally entitled to, simply because they didn't know they were victims in time," he said.
Mortlock said AFCA was supposed to protect consumers but by setting an arbitrary cut-off date and forcing people to prove they didn't know about the issue sooner, it's creating legal hurdles that most can't get over.
Add-on insurance was the industry's dirty little secret for years.
It first landed on ASIC's radar in 2011, at the height of the UK's own add-on insurance scandal. That year, the regulator launched an investigation into 15 financial institutions including the big four banks, CBA, NAB, ANZ and Westpac over the sale of consumer credit insurance (CCI), the most common add-on product.
ASIC made 10 recommendations, but little changed. The products kept selling, the mis-selling continued, and the industry kept profiting at the expense of customers.
In 2017 ASIC sounded the alarm again, raising concerns about the way the products were being sold.
And in 2019, following the release of the banking royal commission's final report, ASIC released a fresh report that had reviewed the sale of CCI products by 11 financial institutions between 2011 and 2018 and found the sales practices and product design were still delivering "extremely poor value for money."
It found that for CCI sold with credit cards, consumers received only 11 cents in claims for every dollar paid in premiums. Across all CCI products the average return was 19 cents, confirming the product was effectively junk.
"Telephone sales staff used high-pressure selling and other unfair sales practices when selling CCI, and consumers were given non-compliant personal advice to buy unsuitable policies," ASIC's report said.
Since the release of the report, the 11 lenders it focused on as part of its investigation, stopped selling CCI with credit cards, personal loans, or home loans.
In a statement Emma Curtis, AFCA's Lead Ombudsman for Insurance, said AFCA wanted to make sure consumers know this deadline is approaching so it has been running ads on radio across the country, as well as print ads in major newspapers and online, to reach as many people as possible.
"Under our rules, AFCA will generally not consider a complaint unless it was submitted within six years of the date the complainant first became aware or should reasonably have become aware that they have suffered a loss. The sale of add-on insurance has been the subject of significant media, regulator, industry and consumer advocacy campaigns and class actions for many years. AFCA is letting consumers know that we will generally consider complaints regarding the sale of add-on insurance sold before July 2019, provided they are submitted to AFCA by June 30 this year."
She said AFCA will generally assess complaints lodged after that date as outside the six year time limit, unless the complainant can demonstrate that special circumstances apply, which we will assess on a case-by-case basis.
ASIC said in a statement it had published numerous reports revealing that add-on insurance sold at point-of-purchase was often low value, commission-driven, and ultimately ended up in customers paying for coverage they were unaware of or did not need.
ASIC's remediation update in 2022 found that there had been $5.6 billion in remediation for an estimated seven million Australian consumers for failures identified across the financial system. This included remediations in the insurance industry totalling more than $1.3 billion. Junk insurance was just one component of this, along with pricing promises failures and poor sales practices.
It seems after years of financial misconduct the burden is on consumers, many still unaware they're owed a refund. With little fanfare and a deadline fast approaching, millions may slip through the cracks.