ASIC Report 256-Consumer credit insurance: A review of sales
practices by authorised deposit-taking institutions
Financial Services, Insurance
The Australian Securities and Investments Commission has
recommended 10 ways in which the sale of consumer credit
insurance products can be improved. 1 These
recommendations, made on 19 October 2011, arise from
ASIC's report on poor practices used by banks, credit unions
and building societies to sell CCI products. CCI is now firmly on
ASIC's radar, so insurers and their distributors should not be
surprised to receive notices from ASIC inquiring about their sales
Past mis-selling of CCI products prompted ASIC to conduct a
review of the sales practices of 15 authorised deposit-taking
institutions. ASIC reviewed how these products had been sold in
conjunction with home loans, personal loans and credit cards during
2009. ASIC obtained information from the ADIs about their sales and
disclosure practices, their training and monitoring programs and
how they responded to complaints and breaches.
ASIC Commissioner Peter Boxall stated that the review revealed
practices that had led to 'poor outcomes for consumers'.
2 He noted that the recommendations contained in
ASIC's report were relevant not only for ADIs that sell CCI
products but also non-ADI distributors, as well as product issuers
All insurers and distributors involved in the sale of CCI
products should read ASIC's report carefully but here is a
summary of ASIC's 10 recommendations:
Use a formal script or checklist when selling CCI products
ASIC considers that consumers can be misled when sales staff
'ad lib'. It has provided a list of 10 key features that
each sales script should contain. Every distributor of CCI products
should compare their scripts against ASIC's list.
Keep a record of the consumer's agreement to purchase CCI
This may be a signature in the case of a face-to-face sales
situation or a recording of consent given during a telephone
Inform the consumer about any interest payable on the premium
If the consumer's loan will fund the CCI premium, the
consumer should be told that they will need to pay interest on the
premium and, ideally, the total amount of that interest.
Tell the consumer the amount of the loan repayments and,
separately, the premium
ASIC's recommendation is not to even raise the issue of CCI
until after the loan repayment amounts have been quoted.
Disclose how the CCI premium is structured
For example, is the premium funded by the loan? How often is the
Ensure the consumer knows the duration of the CCI product
This is especially the case where the duration of the CCI
product is not linked to the duration of the underlying loan.
Provide a product disclosure statement to the consumer at the
In most cases, this will be before the CCI product is
Help the consumer obtain more information about their CCI
ASIC expects contact details for queries and claims to be
Provide staff with ongoing training
The training should cover all of the areas ASIC has identified
in its report.
Document and implement a monitoring system for non-compliant
ASIC expects regular reviews of sales, complaints and
cancellations, including procedures for following up complaints
with staff and consumers.
What further action does ASIC have planned?
This is not the last we will hear from ASIC on the matter of CCI
products. ASIC has signalled its intention to:
publish more information to educate consumers in relation to
review ADIs to ensure that they implement ASIC's
review in more detail the claims and complaints handling of
ADIs and insurers in relation to CCI products; and
review the profitability of CCI business, due to ASIC's
concern that CCI claims are declined at a disproportionately high
ASIC has also fired a warning shot across the bow of non-ADI
distributors of CCI products, stating that it may review their
practices in future.
DibbsBarker has advised many insurers and distributors in the
sale of CCI products. We can help you review the impact of
ASIC's recommendations on your business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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