ANZ revealed that it backs the Productivity Commission’s (PC) recommendation on refunds for lenders mortgage insurance (LMI), writing in its second submission to the PC, released on Wednesday (20 March).
“[We] agree with the commission’s recommendation on refunds of lenders mortgage insurance (LMI),” the submission reads.
The PC’s draft recommendation suggested that it would ask the government to require all lenders to “offer home loan customers refunds for the cost of lenders mortgage insurance when customers choose to refinance or pay out their loan”.
The PC also called for the refund schedule for the remaining life of the loan to be “set and made available to the borrower at the time the policy is started”.
ANZ indicated that it has already introduced a refund policy for eligible customers.
“We have already approved a refund policy for eligible ANZ LMI premiums paid on or after 1 October 2017 when an insured loan is repaid in full within the first two years of its term.
“We are working to automate payment of these refunds later in the year. The refunds cover complete loan repayments within the first two years of the loan term.”
However, ANZ has expressed opposition to draft finding 11.1 of the PC’s draft report, which claimed that the LMI market is “highly concentrated”.
Appearing before the PC on 6 March, ANZ representatives were questioned by commissioners over the lack of “competitive tendering” in the LMI space.
ANZ CEO Shayne Elliott argued that pricing of LMI isn’t “simple”. He drew an analogy between the issuing of LMI as part of a loan product and the purchasing of a car.
“It’s a little bit like buying a car. I don’t go through and say: ‘I’d like to understand who all the possible providers of the air bags are [and] I’d like to know who are the possible providers of the steering wheel, and the seats and all those bits and prices’ — it’s a package,” Mr Elliott said.
“[LMI] is part of [the] package, and if you don’t want the LMI, you can’t have the loan. It goes together.
“The idea that we should slice and dice all the features and functions and compete on them individually — I don’t think it’s reasonable for us to provide that.”
[Related: LMI competition is unreasonable: ANZ]