Two funeral insurance companies were called to give evidence in Round 4 of The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services
Industry, Experiences with financial entities in regional and remote communities. Submissions centred on the appropriateness of products, the non-disclosure that the total premiums of a policy could be more than the benefit provided, and the provision of misleading information.
Most of the heavily advertised funeral insurance products are issued by life insurance companies, but privately labelled by an independent marketing company that re-prices it
(to allow for marketing expenses) and then directly markets it to consumers. The Australian Prudential Regulation Authority (APRA) regulates the life company and the Australian Securities Investment Commission (ASIC) regulates the marketing company. ASIC has had some success in dealing with the marketing companies in recent years to
improve disclosure and the terms & conditions of products, however as noted in ASIC’s evidence at the Royal Commission they consider there is some ambiguity as to their regularity powers with these companies.
Compare this to how friendly society funeral benefit funds (funeral bonds & funeral insurance funds) are regulated by APRA. APRA has a much broader authority of friendly
societies. Not only do they impose prudential regulations (as with life companies) they monitor the segregation of assets, and as well, all friendly society fund rules must be approved by APRA to ensure all members are treated equitably.