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Wednesday 26 June 2013

13-152MR ASIC acts to improve consumer understanding of funeral insurance

In response to concerns raised by ASIC as part of its industry review, Hollard Financial Services Pty Ltd (HFS) has agreed to implement changes to the way it promotes funeral insurance. HFS operates the brand ‘Real Insurance’ which distributes ‘Real Funeral Expenses Cover’ (the product).

ASIC was concerned that in HFS's advertising dealing with the price of the product:

  • there was insufficient information about premium increases

  • some qualifications regarding price were inadequate This included, in some cases, a lack of clarity about who minimum quoted prices applied to, and in some advertisements not including relevant information prominently enough, and

  • prior to May 2012, prices quoted were not representative of imagery used in advertising. For example, actors' ages.

ASIC's view was there was a risk that some consumers may be mislead about these matters.

These are part of broader concerns ASIC has that the funeral insurance industry is not being sufficiently clear in advertising and disclosing key aspects of the product to customers.

These concerns were underscored by consumer research ASIC issued in July 2012. Report 292 Paying for funerals: How consumers decide to meet the costs (REP 292) found there was some consumer confusion on keys aspects of funeral insurance (refer 12-170MR).

HFS has agreed to make a number of changes to its advertising, including:

  • prominent disclosure that premiums increase with age

  • where prices are promoted in advertising, prominent disclosure about the key assumptions the price is based on, for example, age and benefit amount

  • using imagery in advertising that is consistent with other representations made in advertising in relation to price, and

  • disclosing risks associated with the product, including the risk that consumers may pay more over time than the benefit they will be entitled to, and that consumers are not entitled to a refund of premiums paid if they decide to cancel.

‘HFS has engaged constructively with ASIC in relation to the concerns we raised’, Deputy Chairman Peter Kell said.

‘We think the changes they are making to their advertising will significantly improve the way in which important features of this product are conveyed to consumers. We will continue to work to get commitment to similar standards of advertising across the funeral insurance industry’.

Additional action taken by HFS

HFS has gone further by agreeing on its own initiative to introduce changes to the features and pricing of its funeral insurance products by the end of June 2013. These changes include premium rate reductions and the freezing of premium increases at age 80. These changes will result in:

  • savings for many existing and new customers, in particular for those aged 72 and over, as they will benefit from premium rate reductions ranging from 8% to 64%, relative to current rates, and

  • no premium increases for policyholders from age 80 to 90, at which time cover continues and no further premiums are payable.

‘ASIC welcomes the additional changes HFS is making to their product, which should result in direct financial benefits for current and future customers’, Mr Kell said.

Further ASIC work

ASIC is closely reviewing advertising for funeral insurance and is looking at taking regulatory action in relation to other matters. ASIC also intends to undertake a more detailed health check of the marketing of funeral insurance. We want to address the problems in consumers' understanding of the product and ensure that advertising creates realistic expectations, importantly about costs and risks.


  • Report 292 Paying for funerals: How consumers decide to meet the costs (REP 292)

  • Regulatory Guide 234 Advertising financial products and advice services (including credit): Good practice guidance (RG 234)

Last updated: 26/06/2013 12:00