ASIC watches funeral insurers

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ASIC is keeping an eye on funeral insurance providers as part of its focus on the industry, warning there is still a risk vulnerable consumers are being misled. 

The regulator forced TAL, under its brand InsuranceLine, to withdraw product advertising it deemed misleading last year.

ASIC was concerned premium increases and stepped premiums were not adequately disclosed or explained, qualifications relating to advertised prices were not sufficiently prominent, and qualifications relating to advertised prices were not sufficiently prominent.

The company withdrew the advertisements in June, and announced the introduction of its new range of funeral insurance products, with policy features including level premiums for the life of the policy and capped premiums.

But ASIC believes there may be a risk that some consumers could be misled about funeral insurance.

“It is important that funeral insurance ads create realistic consumer expectations, in particular about the cost of the product,” deputy chairman Peter Kell said in a statement yesterday.

“ASIC generally considers there are features of funeral insurance that can be particularly difficult for consumers to understand such as increasing premiums and that premium payments can exceed the actual benefit to be paid out under the policy.

“Designing funeral insurance policies with these types of consumer risks in mind is not only likely to provide significant benefits to consumers but also likely to result in clearer advertising messages.”

The regulator will continue its focus on funeral insurance and take steps to ensure that consumers understand funeral insurance products, Kell said.

In September, risk advisers were called on by consumer groups to help tackle the problem by letting their clients know about funeral coverage.

Consumer Action Law Centre CEO Gerard Brody said the advocates wanted to present the insurance industry with a list of practical measures which would have tangible benefits for present and future policy holders.

One of the steps calls for life insurers and advisers to tell consumers about coverage for funerals. Life cover in super can entitle family members to a payment at the time of a person’s death, but the claims can take time and money is needed quickly for a funeral.

Another insurance provider which changed its advertising last year after ASIC expressed concern was Hollard Financial Services.

The regulator was worried there was insufficient information about premium increases in Hollard’s advertising, including lack of clarity about who minimum quoted prices applied to.