Mr Frydenberg says that that funeral expenses policies should be treated the same as life insurance.
Federal Treasurer Josh Frydenberg has proposed new laws aimed at protecting vulnerable Australians from being fleeced by funeral insurance plans.
The announcement comes on the heels of banking royal commission recommendations, which heard terrible tales of customers who’d spent thousands of dollars on funeral plans that fell well short of expectations upon remittance.
The legislation focuses on ‘funeral expenses policies’ that charge premiums similarly to insurance products, but only pay out remuneration based on receipts for funeral-related expenses. Funeral expenses policies are different to ‘funeral insurance’ policies, which pay a lump sum to beneficiaries to be used at their discretion.
Funeral expenses policies are unregulated and currently not covered by the same laws as life insurance products.
The Financial Services Council (FSC), which represents the life insurance industry, supports Mr Frydenberg’s proposal, saying that funeral expenses policies should be treated the same as life insurance.
“These policies should come under all the same scrutiny as other insurance policies,” FSC senior policy manager for life insurance Nick Kirwan told The New Daily.
“[Currently they’re] outside the reach of ASIC, which makes it really difficult for them to step in even though they’d like to.
“It’s a technically different-structured product which gets around current laws, and a very confusing sounding name, all of which conspires to have all the wrong outcomes for consumers.”
The Treasurer’s proposed legislation aims to address this by allowing the Australian Securities and Investments Commission (ASIC) to enforce the same laws that apply to other financial products.
“The removal of this exemption will ensure that consumers have appropriate protections when taking out funeral expense policies to help fund the costs associated with a funeral,” said Mr Frydenberg.
“These regulations will improve consumer outcomes by requiring providers of funeral expenses policies to hold an Australian Financial Services licence and be fully regulated by [ASIC].”
Consumer advocacy group Choice, which has long lobbied for fixing funeral insurance policies, said the draft is a step in the right direction.
“It’s a positive for consumers because those companies will actually be regulated whereas before they could avoid the law,” said Choice investigative journalist Saimi Jeong.
“It’s good that the government has agreed to close this loophole that allows what’s essentially a type of insurance policy to skirt the regulations that are in place for insurance providers.”
However, Ms Jeong believes more needs to be done to prevent Australians being fleeced by the funeral industry, saying funerals really “don’t need to be so expensive”.
“There are quite a few different advance payment plans to pay for funerals … because the cost of a funeral is so high, it creates a demand for another funeral product and that’s the advance payment plans,” she said.
“Funeral expenses plans like the ones being dealt with by this draft legislation are just one of the (funeral-related) products.
“Funeral homes (are) charging inflated costs with massive mark-ups.”
Do you think funerals are too expensive? Have you been fleeced by a funeral insurance policy?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
Join YOURLifeChoices, it’s free
- Receive our daily enewsletter
- Enter competitions
- Comment on articles