Retired college professor Mary Paul warns people to check their credit card statements if they’re unknowingly paying for substandard credit card prepayment insurance they can’t get enough of.
Credit card repayment insurance is insurance designed to make repayments if a cardholder falls ill, is seriously injured or becomes unemployed, but the banks no longer sell it after criticism from the financial market regulator Te Mana Tātai Hokohoko (FMA) over abuse scandals abroad.
But when Kiwibank, ASB, Westpac, Bank of New Zealand and ANZ stopped selling, they didn’t cancel existing policies, and at the end of last year an estimated 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.
CONTINUE READING:
* Least competitive insurance and credit market scandal
* Credit Card Payback Insurance Warning: 200,000 people with “poor” insurance coverage
* Consumer NZ: Look at the banks’ “money for jam”.
It turns out the Aucklander was sold credit card insurance in 2006 during a three-minute, 30-second phone call from a Kiwibank salesman.
Since then, she had paid over $1000 in bonuses, with bonuses only being collected during months when she hadn’t paid off her card in full.
She chided herself for not noticing the deductions earlier, but she also quickly realized that a policy of little value to her had been sold to her in 2006.
“I had a job that I would probably never lose. I had a house. I had life insurance. I don’t see any way I could claim that,” she said.
Data collected by the Reserve Bank and Financial Markets Authority revealed the worst value personal insurance policies being sold by banks and insurers. First release 2020.
She secured a recording of the sales call and heard no attempt by the salesperson to verify that the cover had value to her.
In 2019, Liam Mason, then director of regulation at the FMA, said there were “very limited circumstances” where credit card payback insurance was likely to be of real value to consumers.
After Paul turned 65 in 2017, Kiwibank’s policy meant she could no longer claim permanent or temporary disability, layoff, bankruptcy or serious illness.
That left only claims in the event of death or terminal illness, and she still had life insurance, so she didn’t need it.
She first complained to Kiwibank and then to Cigna, the insurer behind Kiwibank’s policies. Both said they would look into her complaint, but Cigna has already refunded her just over $100 in awards as a “goodwill gesture.”
A spokesman for Kiwibank said the bank is “aware of this particular complaint and is working on it with Cigna.”
Looking back, Paul thinks she might have been sold insurance in 2006 that she didn’t need. She was recently divorced and was ill.
delivered
A Kiwibank spokesman said the bank was handling Mary Paul’s complaint at Cigna.
As she listened to the sales tape, she sounded exhausted, distracted, and desperate to end the conversation.
Newly released research from the FMA shows that most people, including highly educated people like Paul, experience periods when they exhibit “traits of vulnerability” that make them vulnerable to exploitation by financial services firms or crooks.
She said she had no memory of the call.
Cigna said it contacted all credit card payback insurance customers each year, but Paul said a phone call to see if coverage still met their needs was better than sending letters.
Cigna sent Paul copies of letters she sent to policyholders in 2019 and 2021, and Paul said she doesn’t remember receiving them.
The December 2021 letter said it was important to review her insurance needs regularly and that her claim options were limited as she was over 65.
Concerns about credit card payback insurance date back to 2013, but as recently as March of last year, Kiwibank became the last major bank to stop selling.
When the FMA investigated, they encountered problems.
It brought a case to the High Court against ANZ, which was eventually fined $280,000 for charging premiums to people too old to make a claim and charging some customers two premiums on the same policy had billed.
Cigna, which bought ANZ’s insurance operations, had to pay $180,000 and undertake to develop effective systems to prevent further failures in treating customers fairly.
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