We recently came across a Australian Securities and Investments Commission (ASIC) report on the funeral insurance industry (published Oct ’15) which showed 80% of the policies sold in 2014 were cancelled during the within the next 12 months, with the cost of premiums being the main reason.
The report revealed sharp rises in premiums for Australians aged 50 years or older. With people aged 80 to 84 paying up-to four times more than 50 to 54-year-olds in average premiums.
The high rate of cancellations points to problems not only with cost, but the design, marketing and sales of funeral insurance. It appears that many consumers do not understand important features of the product until after they have signed upASIC deputy chair Peter Kell said in the report.
ASIC said many consumers don’t understand key features such as premiums increasing with age, the total cost of the insurance compared with the real cost of a funeral and importantly, what will happen if they miss payments or cancel their policy.
People were also not aware that they could meet funeral costs by other means, such as pre-paying up-front or by installments. We have previously highlighted the differences between Funeral Insurance and Pre-paid Funerals that provides more details on the benefits of pre-paying.
So what does all this mean? Well I for one am glad to see this issue finally recognised by ASIC!
This has been an ongoing problem for a long time with people ending up paying several times more the cost of a funeral through insurance than they would be pre-paying the funeral.
If you or anyone you know is considering funeral insurance, please share this article with them so they can make an informed decision. Of course the team at Southern Cross Funerals would also be happy to answer any questions you have on arranging or pre-paying a funeral and you may find this quick guide to pre-planning a funeral helpful.
Full details of the ASIC report on Funeral Insurance can be found here.