In this landmark development for Australian consumers, Allianz Insurance has entered into a $170 million settlement agreement to compensate approximately 200,000 Australians to whom car dealerships sold add-on insurance products. This settlement remains one of the largest consumer class action settlements in Australian history for allegations that these insurance products provided little to no value to clients.
Background: The Allegations Against Allianz
Between June 1, 2006, and September 27, 2021, Allianz sold various add-on insurance products through car dealerships. These included Loan Protection Insurance and Motor Equity Insurance, Extended Motor Warranty and Tyre and Rim insurance.
The class action filed by Maurice Blackburn and Johnson Winter Slattery alleged that the products were frequently mis-sold to consumers. Customers were persuaded into buying insurance that ultimately gave little or no benefit in proportion to their costs.
Regulatory Scrutiny and Findings
The Australian Securities and Investments Commission (ASIC) had raised serious issues regarding the value of these add-on products. From 2013 to 2015, consumers paid an astounding $1.6 billion in premiums for such products while only $144 million in successful claims.
In stark contrast, car dealerships pocketed $602 million in commissions during the same period. Such a huge disparity illustrated the extent to which consumers were paying for policies that were never really paid back.
Eligibility Criteria for Compensation
Individuals who purchased a vehicle from a dealership between June 1, 2006, and September 27, 2021, would be eligible for compensation under the settlement. These individuals would have had to purchase one or more add-on insurance products that were issued by Allianz, including Loan Protection Insurance, Motor Equity Insurance, Extended Motor Warranty, or Tyre and Rim Insurance. These individuals must have during the course paid a premium or become liable for the cost of these insurance products.
Importantly, affected persons were to register for the class action before 15 July 2024 at 16h00. Late registration can mean that those affected are generally not eligible to be compensated unless an exemption is granted by the court.
Next Steps: Court Approval and Compensation Distribution
The settlement proposal is presently pending final approval by the Court on March 11 in the year 2025. If the settlement is approved, the $170 million fund will be disbursed to the registered group members. Compensation varies due to several factors, such as how much each person paid in premiums on the insurance policies and if they have received any refunds or payments from Allianz on the insurance claims.
Settlements will be reduced by legal costs of 25 percent and allocated in the amount of $5 million for reimbursement and administrative costs. So in the end, the amount each consumer receives will depend on their concrete situation.
Communication with Affected Consumers
Maurice Blackburn has taken a proactive role to contact all eligible group members with text messages, emails, and postal notices. Registered members do not have to do anything unless they are willing to object to the proposed settlement. The law firm has reiterated that it will work to ensure that affected consumers receive the compensation that is due to them.
Conclusion: A Big Win for Consumer Rights
This settlement is a big win for consumer rights in Australia. It addresses the long-term practice of selling low-value insurance products in car sales to unsuspecting buyers. The case demonstrates the value of not only regulatory oversight but also legal recourse themselves in consumer protection.
Ultimately, this pay-out of $170 million exemplifies that corporations must be answerable for all their acts that aim to mislead or opportunistically benefit consumers.