Retired university lecturer Mary Paul is warning people to check their credit card statements in case they’re unwittingly paying for poor-value credit card repayment insurance they have little chance of claiming on.
Credit card repayment insurance is a form of insurance supposed to make repayments if a cardholder falls ill, is seriously injured, or is made redundant, but banks no longer sell it after criticism from the Financial Markets Authority Te Mana Tātai Hokohoko (FMA), and misselling scandals overseas.
But when Kiwibank, ASB, Westpac, Bank of New Zealand and ANZ stopped selling it, they did not cancel existing policies, and late last year, it was estimated about 200,000 people still had policies.
Paul found out she was among them after querying a charge on her Kiwibank credit card earlier this year.
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It turned out the Aucklander was sold credit card insurance in 2006 during a three minute, 30 seconds call from a Kiwibank salesman.
She had paid over $ 1000 in premiums since then, with premiums only charged in months she didn’t pay her card off in full.
She kicked herself for not having noticed the deductions before, but she also quickly realized that in 2006 she had been sold a policy of little value to her.
“I was in a job I was never likely to lose. I had a house. I had life insurance. I can’t see any way I could claim on it, ”she said.
Data gathered by the Reserve Bank and Financial Markets Authority revealed the worst-value personal insurance sold by banks and insurers. First published in 2020.
She secured a recording of the sales call, and heard no attempt by the salesman to check whether the cover had any value for her.
In 2019, Liam Mason, director of regulation at the FMA at the time, said there were “very slim circumstances” in which credit card repayment insurance was likely to be of real value to consumers.
After Paul turned 65 in 2017, the terms of Kiwibank’s policy meant she would have no longer been able to claim for permanent or temporary disability, redundancy, bankruptcy, or critical illness.
That only left claims in the case of death, or terminal illness, and she still had life insurance, so didn’t need it.
She complained, first to Kiwibank, and then Cigna, the insurer behind Kiwibank’s policies. Both said they were looking into her complaint di lei, but Cigna has already refunded her just over $ 100 of premiums as a “gesture of goodwill”.
A Kiwibank spokesperson said the bank was “aware of this specific complaint and are working through it with Cigna”.
Looking back, Paul thinks she was susceptible to being sold insurance she did not need in 2006. She was recently-divorced, and had been ill.
When she listened to the sales recording, she sounded exhausted, distracted, and keen for the conversation to end.
Newly published research from the FMA shows most people, including highly-educated people like Paul, experience periods where they have “vulnerability traits” that make them susceptible to being exploited by financial services companies, or crooks.
She said she had no memory of the call.
Cigna said it contacted all credit card repayment insurance customers each year, but Paul said a phone call asking whether the cover still suited their needs would be better than sending letters.
Cigna emailed Paul copies of letters it sent policyholders letters in 2019 and 2021, which Paul said she did not remember receiving.
The December 2021 letter said it was important to regularly review her insurance needs, and that as she was over 65, her opportunities to claim were limited.
Concerns about credit card repayment insurance date back to 2013, but it was not until March last year that Kiwibank became the last big bank to stop selling it.
When the FMA investigated, it found problems.
It took a case to the High Court against ANZ, which was eventually fined $ 280,000 for charging premiums to people too old to claim, and charging some customers two premiums for the same policy.
Cigna, which bought ANZ’s insurance operation, had to pay $ 180,000 and pledge to develop effective systems to prevent further failures to treat customers fairly.