Treasurer announces plans to stop funeral insurance ‘rip-offs’

Mr Frydenberg says that that funeral expenses policies should be treated the same as life insurance.

Treasurer announces plans to stop funeral insurance ‘rip-offs’

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.

RELATED ARTICLES





    COMMENTS

    To make a comment, please register or login
    Charlie
    4th Oct 2019
    10:50am
    I don't know whether I've been fleeced or not.
    I payed a lump sum to the local funeral director to cover my funeral. Since then it has earned interest.
    But when I informed the local funeral director i was moving to a different town in the same state. They said if i died i would have to pay extra for the transport of my body back to the local burial plot.
    This was A sum of money in the vicinity of the current removals cost for going to the other town to live.
    Horace Cope
    4th Oct 2019
    12:06pm
    My understanding of a prepaid funeral, Charlie, is that the funds are placed in a trust which is transferrable in the event that the funeral company closes or one moves to a different location. Perhaps this site may help you plight: https://www.funeralwise.com/plan/preplanning/changing/
    Charlie
    5th Oct 2019
    7:18am
    Yep the funds are in a trust but when I spoke to the funeral director about another funeral service in a different area, they said "if you can find a funeral service that wants to accept the contract" as if there was something difficult about the process.

    I guess the only solution is to see another funeral service after I move and find out the full story.
    jaycee1
    5th Oct 2019
    1:15pm
    Charlie,
    I have a prepaid funeral and was told that when I die, if not in Sydney, then my body will be brought from wherever I am to Sydney for burial at no extra cost. I am with Guardian Funerals.
    Horace Cope
    4th Oct 2019
    12:02pm
    Funeral insurance is basically a life insurance policy, no more, no less. When taking one out, the purchaser is agreeing to a set payment on death which at the time of signing covers a funeral but will not allow for inflation and future price rises in the funeral industry. On the other hand, there are prepaid funerals which have all of the wishes of the purchaser documented and the funeral will be paid for regardless of the time between purchase and death. A small advantage is that the funds used to prepay a funeral are not included as an asset for assessment of eligibility for an age pension.
    ray from Bondi
    4th Oct 2019
    3:08pm
    yes I went with the fully funded prepaid version, but I am concerned that when needed there will be no hiccups, the industry is geared to take as much as they can.
    ray from Bondi
    4th Oct 2019
    3:06pm
    the whole system is geared to take as much as they can, I handled both parents funerals and it was a nightmare.
    I recently signed up with a prepaid plan to save whoever was handling my funeral of having to thorough the anguish I did and it was not much better.
    I wanted somewhere at the same place to hold the wake, no problems they said we have a great place, after the paperwork was signed, (my fault there) I asked to see it, a little hallway from the door to the chappel, no chairs tables or anything, I was so burnt out I said fine to myself. but warn anybody to double-check everything as there is no mercy with that business model.
    Yer man
    4th Oct 2019
    4:11pm
    We ,my wife and I took out funeral insurance a few years back. The premiums increased each year up to the age of 80.When I reached the age the premium increased as usual. I queried the increase. Seniors Funeral told that you had to be 80 for a full year .Now that I am 81 the premiums have not increased. So you can't claim to be 80 until you hit 81. BS Rip off.
    Yer man
    4th Oct 2019
    4:11pm
    We ,my wife and I took out funeral insurance a few years back. The premiums increased each year up to the age of 80.When I reached the age the premium increased as usual. I queried the increase. Seniors Funeral told that you had to be 80 for a full year .Now that I am 81 the premiums have not increased. So you can't claim to be 80 until you hit 81. BS Rip off.
    Circum
    4th Oct 2019
    5:05pm
    Transport can be via air,if urgency is required and can be expensive.Often transport is via a refrigerated van or semi trailer where the coffin is transported with other goods.My experience is that costs are generally under $1000 between capital cities.
    Circum
    4th Oct 2019
    5:05pm
    Transport can be via air,if urgency is required and can be expensive.Often transport is via a refrigerated van or semi trailer where the coffin is transported with other goods.My experience is that costs are generally under $1000 between capital cities.
    Circum
    4th Oct 2019
    5:05pm
    Transport can be via air,if urgency is required and can be expensive.Often transport is via a refrigerated van or semi trailer where the coffin is transported with other goods.My experience is that costs are generally under $1000 between capital cities.
    ozirules
    5th Oct 2019
    11:17am
    I would never take out a funeral ins policy or prepay for a funeral. They are there to make a profit for the providers who advertise using the guilt ploy. If you dont have enough value in your estate to cover funeral costs and you do feel guilty about leaving a problem for loved ones then put aside a regular amount toward the future costs. Funerals do not have to be big lavish affairs despite some providers playing the guilt trip on you. There are no frills companies out there that do not cost the earth but offer very good service.
    Blossom
    6th Oct 2019
    9:07pm
    We have pre-paid funerals. We took out insurance in case we were over a certain distance from home because of going away for holidays. It wasn't very much for peace of mind. Our worst cost was extending the length of lease on the burial site. There was already two previous burials on the same site. Basic small headstones are expensive too.
    Blossom
    6th Oct 2019
    9:07pm
    We have pre-paid funerals. We took out insurance in case we were over a certain distance from home because of going away for holidays. It wasn't very much for peace of mind. Our worst cost was extending the length of lease on the burial site. There was already two previous burials on the same site. Basic small headstones are expensive too.


    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles