Creditors overcharging for insurance on credit?
At the end of last year Treasury (Along with the NCR and FSB) arranged for a special task-team to investigate insurance products which are bundled with credit products ( Credit Insurance ). When consumers make use of credit this is insured in case of death or in many cases non payment or retrenchment. The National Credit Act (NCA) says that consumers can choose to use either insurance suggested by creditors or their own. For most consumers though they would not even know where to begin looking for alternative insurance on their credit. Generally consumers simply sign the forms and are not aware of whether they are getting a good rate on this insurance or not. Now it seems the report is saying it is mostly “not”.
Last year, various media outlets ran stories on how major listed retailers were charging excessively for insurance products when bundled with products such as furniture. In many cases the insurance as supplied by the creditor was four times as expensive as related products or products offered by other reasonable creditors. In other words, consumers could have been paying a quarter of that cost and saving money or using it to pay off their debts faster.
Also of concern has been how the insurance products are explained to consumers and if full disclosure is made about what is covered. Few consumers actually seem to understand what this insurance is for.
The new report when made widely available is slated to start much needed changes in this aspect of the industry.
If you are under debt review you can talk to your Debt Counsellor about companies which you can ask for help in investigating reducing your insurance costs on credit.