The Australian Securities and Investments Commission (ASIC) has blown the whistle on the funeral insurance industry’s advertising tricks by publicly airing concerns about the advertising of Hollard Financial Services Pty Ltd, which trades as Real Insurance. In a move welcomed by Consumer Action Law Centre and the Insurance Law Service, ASIC has turned the spotlight on an industry which typically sells insurance by preying on people’s fears and anxieties, while disguising premiums and the real costs of their products.
‘We’ve had concerns about the way funeral insurance is advertised for years, so it’s great to see ASIC turning its attention to these matters. Funeral insurance advertising can be heavy during daytime television and is often highly emotive and lacks clarity around premiums and costs,’ said Gerard Brody, CEO of Consumer Action.
‘We certainly share ASIC’s concerns about insufficient information about premium increases. Many people don’t realise that funeral insurance can get more and more expensive as you get older and, therefore, it often gets more and more unaffordable as well. It is tragic that someone could pay insurance for decades but, when they reach old age and their income is lower, they can no longer afford the policy and they receive no benefit after years of making payments.
‘This case seems to suggest that ASIC wants clearer disclosure in the industry, but we suspect that many of the insurers will be dragged kicking and screaming to improve because, when you take the time to consider their products, the one thing that is nearly always missing is value for money,’ said Mr Brody.
Mr Brody also pointed to Real Insurance’s decision to reduce or freeze premiums as a tacit admission that it has previously been price gouging.
‘If the market was working properly, competition would be keeping prices down. However, poor marketing and advertising practices means that consumers aren’t able to easily make good assessments when considering funeral insurance, limiting the effectiveness of competition,’ said Mr Brody.
Consumer Action’s views are echoed by the Insurance Law Service (ILS), which operates a national hotline providing free legal advice to insurance consumers.
ILS is concerned with the rise in advertising by funeral insurers over the last few years, and at an increase in complaints from funeral insurance policy-holders who were misled about the fact that premiums will continue to increase as they age.
Katherine Lane, Principal Solicitor at ILS, said the whole funeral insurance industry needs to be reviewed. ‘There is a need for improved regulation in this area in order to make disclosures about increasing premiums in advertising mandatory.’
More information on Consumer Action’s concerns about funeral insurance can be found here.
Media contact: Dan Simpson, 0413 299 567