Insurer Ordered to Refund GAP Premium After Unfair Sale

2

The issue originated from a car sales agent's assertion that the GAP policy was necessary for loan approval, costing a premium of $1495, which was included in the borrowed sum. The consumer argued that the policy held little value since it only partially covered the intended financial gap and was represented as mandatory without clear disclosure of its optional nature.

The Australian Financial Complaints Authority (AFCA) conducted an investigation and found no record of a Product Disclosure Statement (PDS) with adequate information provided to the consumer. While Eric Insurance provided evidence of a PDS indicating that the policy was optional, no confirmation was available to prove its provision to the consumer.

A significant part of the complaint involved the nondisclosure of a hefty 61% commission paid to the sales agent. Although AFCA noted that high commissions alone do not constitute unfairness, they acknowledged the potential for such incentives to foster unethical sales tactics.

AFCA concluded that the consumer likely believed the GAP policy was a prerequisite due to the timing and manner of the sales process, suggesting misrepresentation and high-pressure sales tactics. The lack of transparent information compounded these concerns.

As a result, Eric Insurance has been instructed to refund the policy premium along with applicable interest and any inflation-related adjustments to the consumer.

This ruling underscores the ongoing challenges in ensuring transparent and fair sales practices within the insurance sector. For consumers, it highlights the importance of thoroughly understanding financial products and questioning additional charges tied to loans.

Published:Wednesday, 28th May 2025
Source: Paige Estritori

Share this news item:

Insurance News

Clear

Young Driver Left Uncovered Due to Policy Misstep 05 Jun 2025: Paige Estritori A policyholder faces a denied claim after inadvertently excluding his newly licensed 21-year-old son from his car insurance policy, highlighting a common oversight in age-specific exclusions. Following a collision involving his son, who recently earned his licence, Hollard Insurance declined the claim based on policy terms that excluded drivers under 25, unless accompanied by a qualified adult. - read more

NSW Floods Highlight Critical Insurability Crisis 05 Jun 2025: Paige Estritori Recently, New South Wales has been severely affected by major floods, with damages to around 10,000 homes and businesses. The Insurance Council of Australia has already received over 6,000 claims from the Mid North Coast and Hunter regions, while countless families face displacement as their homes become uninhabitable. - read more

Ride-Share Driver Prevails in Insurance Dispute Over Vehicle Use 04 Jun 2025: Paige Estritori A ride-share driver recently won a significant claim dispute against an insurer that initially denied his claim following a traffic accident. The Australian Financial Complaints Authority (AFCA) sided with the driver, determining that Auto & General could not prove he misrepresented his vehicle use when purchasing his insurance policy. - read more

Streamlining Life Insurance: New Digital Questionnaire Initiative Launched 04 Jun 2025: Paige Estritori In a groundbreaking development for the Australian life insurance sector, a new digital initiative promises to simplify the process of providing medical information for life insurance applications. The collaboration between Acenda, formerly known as MLC Life, and EQ Pathology introduces “smart” digital questionnaires to streamline data collection. - read more

Record Highs in UK Pet Insurance Payouts Reflect Rising Vet Costs 03 Jun 2025: Paige Estritori The landscape of pet insurance in the UK has marked another milestone, with payouts reaching an unprecedented £1.23 billion ($2.36 billion) last year. This 4% increase over the previous year is attributed to soaring veterinary fees, reflecting broader inflation trends in the industry. - read more