Add-on insurance products are general insurance policies that are added on to the sale of a vehicle. They are often paid for by the loan that is taken out to purchase the vehicle.

The more common types of motor vehicle insurance such as comprehensive, third party property, or compulsory third-party insurance are not part of the Allianz Car Dealer Add-On Insurance Class Action.

The common types of add-on insurance sold through car dealers are:

• Loan Protection Insurance (also referred to as “repayment insurance”, “consumer credit insurance” or “CCI”). This insures a borrower’s capacity to make repayments under a car loan, including insurance against sickness, injury, disability, death or unemployment;
• Motor Equity Insurance (also referred to as “guaranteed asset protection insurance”, “GAP insurance”, “shortfall insurance”, “equity insurance”, “equity plus insurance”, “cash benefit insurance”, “purchase price insurance” or “value protect insurance”). This covers the difference between what a consumer owes on their car loan and any amount they may receive under their comprehensive insurance policy, if the car is a total loss;
• Loan Termination Insurance. This covers the difference between what a consumer owes on their car loan and the market value of the car if they return it because they cannot make repayments due to illness or injury;
• Extended Motor Warranty (also referred to as “mechanical insurance”, “motor vehicle warranty” “mechanical breakdown insurance”, “extended manufacturers warranty”, “extended vehicle warranty insurance”, or “extended warranty insurance”). This covers the cost of repairing or replacing parts of the car due to mechanical failure after the manufacturer’s or dealer’s warranty has expired; and
• Tyre and Rim Insurance. This covers the cost of repairing or replacing damaged tyres and rims from blowouts, punctures or other road damage.

The Australian Securities and Investments Commission (ASIC) has undertaken extensive reviews into this industry. Its reviews suggested that add-on insurance sold through car dealers represents poor value for consumers.