Federal Court of Australia decides Centrelink payments can still be used for funeral insurance

On 30 June 2016, the Federal Court of Australia blocked the Federal Government from stopping the use of Centrelink payments for funeral insurance. The Department of Human Services was due to stop making Centrepay payments (i.e. deductions from Centrelink payments) to Aboriginal Community Benefit Fund Pty Ltd (and its related companies) (ABCF) from 1 July 2016. However, ABCF successfully applied to the Federal Court to overturn the Department’s decision, meaning Centrepay payments to ABCF remain in force. ABCF is a private organisation and is the main provider of funeral insurance in Aboriginal communities.

In May last year, the Minister for Human Services announced that funeral insurance would be excluded from Centrepay, ‘because of the particular risks funeral insurance raises for vulnerable customers’. The Federal Court overturned the decision on the basis that the notice given to ABCF, terminating their Centrepay contract, was not given by a person shown to have been entitled to give it. Justice Logan made it clear that it was not his role to ‘determine the worth or otherwise, relative to the premium burden, of the funeral benefit insurance offered by the ACBF’.

Concerns regarding funeral insurance have been raised previously, with an Australian Securities & Investments Commission (ASIC) report last year (ASIC releases Funeral Insurance Report) showing a high rate of cancellations on funeral insurance policies due to steeply rising premiums and lack of understanding of important features before signing up. ASIC’s report also showed 50% of Indigenous consumers with funeral insurance were aged under 20.

Coincidentally, this week is NAIDOC week, and to mark this ASIC has released a new series of videos to help Indigenous consumers with key money decisions, encouraging them to think things over and walk away from high pressure sales situation (further details can be found here). These resources support ASIC’s ongoing surveillance and enforcement work to identify and stop financial misconduct affecting Indigenous consumers.

The Department of Human Services has said they are reviewing the court’s decision and considering their position, so it remains to be seen whether any further steps will be taken in respect of funeral insurance.