In a landmark development for Australian consumer protection, Allianz Insurance has agreed to a substantial $170 million settlement regarding the controversial sale of car dealer add-on insurance products. This settlement, which ranks among the largest consumer class action settlements in Australian history, addresses practices spanning from June 1, 2006, to September 27, 2021.
Background and Context
The class action, jointly pursued by Maurice Blackburn and Johnson Winter Slattery, targeted insurance products sold as supplementary additions during vehicle purchases at dealerships. These products, including Loan Protection Insurance, Motor Equity Insurance, Extended Motor Warranty, and Tyre and Rim Insurance, were alleged to provide minimal or no value to consumers while being marketed through potentially unlawful methods.
The Australian Securities and Investments Commission’s (ASIC) earlier investigations revealed concerning statistics about these add-on insurance policies. Between 2013 and 2015, consumers paid $1.6 billion in premiums but received only $144 million in successful claims. More troublingly, car dealers earned $602 million in commissions during this period, more than four times the amount paid out in claims.
Settlement Details
The settlement, reached without Allianz admitting liability, will benefit approximately 200,000 registered participants. Maurice Blackburn representatives emphasize the significance of this outcome, noting the widespread nature of add-on insurance sales during the claim period and ASIC’s long-standing concerns about these practices.
Eligibility Criteria
To qualify for compensation, individuals must have:
- Registered for the class action before July 15, 2024, at 4 pm
- Purchased a vehicle from a dealership within the specified period (June 1, 2006 – September 27, 2021)
- Purchased qualifying Allianz add-on insurance products
- Paid or become liable to pay premiums to Allianz for these products
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Compensation Structure
The exact compensation amount for each eligible participant remains undetermined. The distribution will consider:
- Individual premium payments
- Previous refunds received
- Prior claim payments from Allianz
Settlement Fund Distribution
The $170 million settlement fund will be subject to several deductions:
- 25% for legal costs to the representing law firms
- Reimbursement costs for the two plaintiffs
- Administrative costs (estimated at $5 million)
Legal Process and Next Steps
The settlement requires court approval, with a hearing scheduled for March 11. Maurice Blackburn is actively notifying eligible participants through multiple communication channels, including text messages, emails, and postal notices. Participants need not take immediate action unless they wish to object to the proposed settlement terms.
Industry Impact and Consumer Protection
This settlement represents a significant milestone in Australian consumer protection law and highlights the ongoing scrutiny of financial product sales practices in the automotive sector. The case underscores the importance of transparency and fair value in insurance products, particularly those sold as add-ons during major purchases.
Future Implications
The settlement may lead to:
- Enhanced regulatory oversight of add-on insurance products
- Reformed sales practices in car dealerships
- Increased consumer awareness about supplementary insurance products
- Stricter compliance requirements for insurance providers
The Allianz settlement marks a substantial victory for consumer rights in Australia, potentially setting precedents for future cases involving financial product sales practices. As the court approval process proceeds, affected consumers await confirmation of their compensation, while the broader industry may need to reassess its approach to add-on insurance products and sales methods.
The case serves as a reminder of the importance of consumer protection measures and the potential consequences of selling financial products that provide questionable value to customers. It also highlights the effectiveness of class action litigation in addressing systematic issues in consumer financial services.
