On 29 October, ASIC released a report into funeral insurance. The report highlights increasing premiums and high cancellation rates. Its focus is to ensure consumers are not being misled by advertising or disclosure and to help consumers better understand the benefits and risks associated with funeral insurance.

The report contained two key findings and corresponding recommendations.

Firstly, ASIC found that premiums rose steeply for persons over 50, as most consumers held stepped premiums that increase with age. The use of stepped premiums may place a burden on ageing consumers at a time when their income is more likely to be fixed or decreasing.

The report recommends that:

  • insurers provide an upfront estimate of the total cost of the policy based on the options offered and
  • that insurers clearly and prominently disclose if the total amount of premiums payable under a policy has the potential to exceed the benefit amount.

The report’s second key finding was there was a high rate of policy cancellations, with nearly 55% of cancellations occurring during the first year of the policy. More than one third of policies were cancelled by the insurer as a result of non-payment.

The high rate of cancellation suggests a lack of understanding of the important features of the product until after the consumer signs up.

The report recommends that:

  • insurers do more to ensure that consumers understand key features of a funeral insurance product when it is sold to them (whether over the phone, in person or online), especially when selling to vulnerable groups like Indigenous consumers; and
  • that insurers offer a longer ‘grace period’ than the 28 days required by law before a policy is cancelled for non-payment.

The report also highlights ASIC will be continuing to monitor funeral insurance, including the effect of product innovations on consumers.

The full report can be found here.