For a general coverage of the law of insurance, see Insurance. Consumers cannot be required to take out insurance in connection with a credit contract, but for compulsory insurance, mortgage indemnity insurance and/or insurance over mortgaged property (s 143(1) NCC). Despite this, consumers are often required to – or inadvertently do – enter into consumer credit, gap cover and mechanical breakdown insurance upon entering into a credit contract. These are often bad value for the consumer, and a high commission is often payable.
A credit provider who wrongly requires a consumer to take out credit-related insurance or leads them to believe they must do so commits an offence and can be required to refund the consumer the whole of the insurance premium (price of the insurance) (s 143(1), (4) NCC). The same applies to credit providers who require a consumer to take out insurance with a particular insurer or unreasonably require that they take out insurance on certain terms (s 143(2), (4) NCC).
The Insurance Contracts Act 1984 (Cth) and the Corporations Act 2001 (Cth) (“Corporations Act”) provide further protection and remedies for consumers who have taken out policies of insurance. In particular, part 7.6 of the Corporations Act requires insurers that have retail customer bases to be registered as financial services licensees, and includes provisions that make an insurer liable for the conduct of its agent if the consumer relied on that conduct in good faith. Intermediaries who arrange insurance may often be agents of the insurer, not the insured, but a broker is usually the agent of the insured.