Maurice Blackburn launches class action against Allianz over junk car insurance rip-off

12 November 2020
Leading law firm Maurice Blackburn Lawyers has launched a new class action against Allianz on behalf of motorists who were sold worthless “add-on” insurance through car dealers.

The class action alleges thousands of motorists who arranged finance through car dealerships were upsold several types of worthless Allianz insurance to shamelessly boost profits.

The class action alleges the junk Allianz insurance products include:

  • “consumer credit insurance” (sometimes called “CCI” or “loan protection insurance”). This purports to insure a borrower’s capacity to make repayments under a car loan, including insurance against sickness, injury, disability, death or unemployment;
  • “shortfall insurance” (sometimes called “GAP insurance”, “guaranteed asset protection insurance”, “motor equity insurance”, or “value protect insurance”). This is said to cover the difference between what a consumer owes on their car loan and any amount they may receive under their comprehensive insurance policy if the car is a total write off;
  • “extended warranty insurance”. This purports to cover the cost of repairs and replacement parts beyond the manufacturer’s warranty or standard warranty for used cars;
  • “tyre and rim insurance”. This covers the cost of repairing or replacing damaged tyres and rims from blowouts, punctures or other road damage.

Many of these insurance products were complex financial instruments with policy terms that had numerous exclusions and exceptions which severely limited the protections offered.

For example, Allianz’s Loan Protection Insurance excluded consumers who were self-employed, unemployed, casual employees and those over the age of 64.

In other cases, customers were sold CCI add-on insurance for death and disability, despite dealers and Allianz knowing they were employed and therefore likely to have cover for things like accident disability through their superannuation funds.

The class action alleges Allianz trained car dealers to promote and sell the add-on insurance products and paid them lucrative commissions.

The lead Plaintiff in the class action was 26-year-old casual employee in 2015 when he was hoodwinked into purchasing more than $3000 in unnecessary Allianz insurance products as part of a loan agreement for a $20,000 Ford Falcon XR6.

Maurice Blackburn Principal Lawyer Andrew Watson said the sale of add-on insurance through car dealerships was widespread and had been criticised by the Australian Securities and Investment Commission over many years.

“Many of these insurance products were unduly expensive and offered no value to customers. The exploitation was compounded when these policies were paid for by the same high interest rate loans that the dealers arranged to finance the purchase of cars.” Mr Watson said.

“The car dealers sold these products when they were of no or very little value and not only did they keep quiet about that but they added the junk insurance products to loan contracts often without their customer being aware. If customers knew and understood that they were being asked to pay thousands of dollars for these valueless products, they would have rejected the offer without hesitation.”

The class action alleges Allianz engaged in misleading or deceptive conduct and behaved unconscionably. The action claims that Allianz should refund all premiums paid by its add-on insurance customers with interest.

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