Funeral insurance RIP-offs exposed

ASIC has today released a report on funeral insurance, highlighting that funeral insurance premiums tend to rise steeply for the over-50s and that many people cancel their policy in the first few years.


When a funeral insurance policy is cancelled there is a loss of the benefit of premiums already paid.


ASIC collected data from nine insurers offering funeral insurance across some 40 brands.


Although some funeral insurers have introduced new products in the past 12 months with improved features, many consumers are still being sold (and continue to hold) policies that expose them to the risks identified in ASIC's report.


ASIC Deputy Chair Peter Kell said, ‘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 up’.


ASIC found that the average premium for 80-84 year olds was four times the average cost for 50-54 year olds because most consumers held ‘stepped’ premiums which increase with age. Even so-called ‘fixed’ premiums often increase (along with the benefit payable) under ‘inflation protection’ measures, usually 5% annually.


In 2014, the number of policies cancelled was 80% of the number of policies sold.


Nearly 55% of cancellations occurred during the first year of the policy.


65% of cancellations were initiated by consumers while 35% were made by insurers for non-payment of premiums. The main reason for cancelling was cost.


Click for the ASIC "Funeral Insurance: A snapshot" infographic


While over half of consumers with funeral insurance were aged 50-74, policies held by Indigenous consumers had a much younger profile, with half (50%) 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.


Mr Kell said, 'ASIC has made a number of recommendations for insurers to assist consumers better understand the product they are purchasing. We also urge buyers of funeral insurance to better inform themselves about the product and ensure they have a clear understanding of the premiums to be paid long-term.'


Some of the report’s key recommendations for insurers are to:

  • provide an upfront estimate for consumers of the total cost of the policy

  • clearly and prominently disclose where there is the possibility that the total premiums payable under a policy could exceed the benefit amount

  • do more to ensure consumers understand key features of the policy when it is sold to them (whether by phone, in person or online), especially when selling to vulnerable groups like Indigenous consumers.



Funeral insurance is a form of life insurance and is sold to consumers to cover the cost of funerals.


The ASIC Report "Funeral insurance: A snapshot" describes common features of policies and provides data about sales, claims and cancellations to better understand the benefits and risks associated with these products. It builds on its earlier report on consumer experience of funeral insurance, "Paying for funerals: How consumers decide to meet the costs".


ASIC has joined with other consumer protection agencies in the Avoid a funeral rip-off campaign which aims to improve awareness among Indigenous consumers of their options when it comes to paying for funerals.


ASIC has also taken action in recent years on misleading advertising of funeral insurance and has produced research and information about alternative ways consumers can pay for their funeral, including superannuation, term deposits, funeral bonds and pre-paid funeral plans. Some of the pros and cons of each option are discussed on our MoneySmart website,


Download ASIC report "Funeral insurance: A snapshot". 


29 October 2015.