A Federal Court decision has allowed for the continued exploitation of Indigenous Australians through dud Funeral Insurance schemes.
For years, low income Indigenous communities have been targeted using the Department of Human Service’s bill paying service (Centrepay), so the commercial Aboriginal Community Benefit Fund (ACBF) can profit while delivering little, if any, benefit.
The court decision effectively over-rules a decision by the previous Minister for Human Services Marise Payne to prohibit funeral insurance providers from using Centrepay to secure payments. It gives the green light for ACBF to profit from Centrelink payments in front of payments for rent, food and other essentials.
“I thought it was like going into a bank account” says Natalie Johnson from Lake Tyers in regional Victoria. Johnson was paying for five funeral insurance policies for her family through Centrepay. She decided to cancel her payments.
“I was paying for 5 people and whatever money was leftover they were keeping. It’s unfair. Whatever money I put in there I should have got back. They should have at least refunded me” says Johnson.
The Indigenous Consumer Assistance Network (ICAN) and Consumer Action Law Centre (Consumer Action) say the situation must be rectified as soon as possible upon the appointment of the new Federal Government.
“There is continual failure to adequately protect indigenous Australians from exploitative financial products” says Aaron Davis, CEO of the Indigenous Consumer Assistance Network.
“Centrepay is meant to help people budget and manage their essentials like paying for their power bills. Instead we have these exploitative companies using Centrepay to sell a dud insurance product. Many Indigenous families want security when it comes to paying for expensive funerals, but in too many cases this product doesn’t provide that security.”
The decision highlights the inadequacy of legislation supporting Centrepay and welfare payments in protecting vulnerable recipients.
“The Government needs to be able to exclude predatory businesses from Centrepay – we’re talking about a business here that has signed up children to very expensive Funeral Insurance. Fixing this must be a priority for the new Minister for Human Services. Centrepay needs strong legislation, not Departmental discretion,” says Gerard Brody, CEO of Consumer Action Law Centre.
Quotes attributable to Gerard Brody, CEO Consumer Action Law Centre:
“Funeral Insurance is a poor-value product that traps people into making lifelong payments that often far exceed the value of the end payout. Many people mistakenly believe these products are a savings plan, rather than the reality that if they stop paying, they could lose all their contributions.”
“Kicking funeral insurance off Centrepay is the right move. Centrepay is supposed to help Centrelink recipients pay for essentials, like rent and utilities. However it’s also attractive to other companies, as it gives them certainty of payment. That’s why it should only be accessible to products and services that serve the interests of low-income Centrelink clients. Funeral Insurance doesn’t pass this test.”
Funeral Insurance is, for most Australians, a product that has little value. If you live for 5-10 years after you take out the policy, you might actually pay more than the benefit sum. And if you can no longer afford to pay the premiums and you have to stop, you generally will not get your premiums back – it’s simply money down the drain.
Providers of this sort of insurance particularly target indigenous communities. Last year ASIC reported that 50% of all policies held by Indigenous consumers were aged under 20. A higher proportion of Indigenous consumers also had their policies cancelled for non-payment of premiums, losing the value of premiums already paid.