The corporate watchdog has its eyes on companies that bundle insurance in add-on packages, after thousands of complaints.

Lumping insurance in as part of ‘extras’ or simply as a hidden cost is a misrepresentation that may soon be hit with charges, ASIC says.

Consumer credit insurance sold with a loan, insurance bundled with the sale of cars and travel insurance provided alongside credit cards are examples of the things the Australian Securities and Investment Commission (ASIC) will crack down on.

ASIC deputy chairperson Peter Kell says the issue has been the subject of continuous consumer complaints.

“They find out down the track that they're paying additional money for something that they haven't understood that they've even been sold, that's especially the case when it's been bundled in with a lot of other products,” he told the ABC.

“It's often the case that consumers don't have that sort of purchase in mind when they're thinking about the main product they're looking at and can sometimes be talked into it or even end up in a situation where they don't realise it's been bundled into the cost of the product.”

“We also find products at the other end when people come to make a claim and suddenly find there are a whole lot of exclusions, exclusions that should have been explained to them very clearly up front, exclusions which probably meant the insurance wasn't suitable for them in the first place,” he said.

Mr Kell says the extra costs can be too much for many.

“Consumer credit insurance is, in effect, a form of credit insurance that covers situations like where you are unable to continue to pay your loan, but that might be because in some circumstances you become unwell or you lose your job.

“One of the things to remember though from a consumer perspective is ultimately the money is used to help refund the lender who has given you the loan, rather than the consumer directly, and sometimes consumers don't understand this,” Mr Kell said

ASIC is keen to avoid the risk and cost of major mis-selling scandals overseas, including the Payment Protection Insurance (PPI) debacle in the UK.

“We're seeing some very significant mis-selling scandals overseas when it comes to add-on insurance at the moment and we want to make sure we don't see those sorts of events playing out in Australia,” Mr Kell said.

“The main one we want to avoid is the Payment Protection Insurance, the PPI scandal in the UK, where so far the industry has had to pay out more than 13 billion pounds in compensation to hundreds of thousands of consumers and there's more coming down the track.

“But we've also seen more recent examples in the UK where the financial services regulator has fined companies tens of millions of pounds for mis-selling.

“It's also happening in the United States where the regulator there has recently fined American Express for some of the add-on insurance products associated with credit cards,” he said.