When David Cail was diagnosed with a serious illness in 2014, he was comforted by the fact he had already made plans to cover the costs of his funeral.
"I had seen ad on TV, and I thought being single, a funeral plan is what I need so the family wouldn't have to worry about it. So I took out a $15,000 policy in 2001," he said.
Mr Cail also took out a $4,000 policy for his elderly mother.
But a few years ago, when his health deteriorated and he was diagnosed with terminal cancer, he was surprised when he enquired about his funeral policy with TAL insurance, or Insuranceline.
Despite having paid TAL $20,500 over about two decades — an amount that was more than his funeral cover was worth — he was told he had to keep paying $43 a fortnight to keep the policy.
At the time, Mr Cail was on the disability pension and relying on food banks to survive after being forced to retire from his career as an actor in film and television shows because of his declining health.
"They [Insuranceline] said, 'you have got to keep paying, we are not a bank, you pay until the age of 90, or until you die'," Mr Cail said.
"And I thought, 'well, hang on a sec, that's not fair.'"
It turned out Mr Cail had signed up to funeral insurance with Insuranceline, and not a pre-paid funeral plan.
Funeral insurance is not a product customers can use to save for funeral costs — instead, it is an insurance policy to cover those costs.
Instead, customers have to keep paying premiums until they die, or typically turn 90.
Insurance premiums typically increase as the policyholder ages, and if repayments are not made, customers lose what they have already paid.
A 2014 ASIC report found average annual premiums quadruples for consumers aged over 50, while a study by the Combined Pensioners and Superannuants Association in 2011 found people could end up paying $140,000 in premiums if they took out a policy at 50, for a $6,000 benefit under some policies if you lived until you were 80.
Prepaid funerals lets customers choose and pay for their funerals in advance, usually through a funeral director.
Mr Cail believes Insuranceline misrepresented the product he was sold.
"If they said it was insurance I wouldn't have taken it out," he said.
"But because it was a funeral plan, that's how they get people conned in."
Consumers pay more than benefit owed
Consumer advocates say Mr Cail's story is not unique.
The managing lawyer at Consumer Action Law Centre, Philipa Heir, said funeral insurers target vulnerable customers with emotive advertisements on daytime television and online.
Ms Heir said many customers don't understand the policy they have signed up for and some may have been sold products illegally.
"And many of them have paid more than the benefit that their family would ultimately get," she said.
"It often gets to the point where they can't afford the premiums anymore, but they feel stuck because they've been paying for so long, and they don't want to lose everything."
In 2018, the Hayne royal commission into banking revealed systemic rorts in the funeral industry, finding insurers paid out only about one third of the premiums collected.
The revelations, and the findings of an alarming Australian Securities and Investments Commission (ASIC) report into funeral insurance which found 80 per cent of new policies were cancelled, prompted Commissioner Hayne to call on ASIC to shut down junk funeral insurance because it "gave little value to consumers."
The royal commission also found Indigenous consumers were targeted by funeral insurers.
In 2022, the collapse of Youpla/Aboriginal Community Benefits Fund resulted in about 30,000 Australians losing millions of dollars in premiums.
Calls for a closer look at industry regulation
The Australian Financial Complaints Authority, receives hundreds of complaints against funeral insurers every year. The majority have been about Youpla. In 2022, it received 1042 complaints, compared with 334 in 2021, 136 in 2020, and 184 in 2019.
However, while funeral insurers have been required to hold a financial services licence since 2020 and companies are prevented from cold-calling and cross-selling to customers, the industry largely makes up its own rules about who the product can be sold to and under what circumstances.
There is no accessible updated information on the total number of funeral insurance policy holders in Australia, total premiums paid compared to claims paid out, cancellations, or ways to easily compare different insurers.
Funeral insurance expert Professor Sandra van der Laan has called for regulators to take a fresh look at funeral insurance.
"It doesn't seem like much has been done since a 2014 ASIC report, which contained some alarming information," Ms van der Laan said.
"And I expect that the information, if we had it again in 2023, would probably be just as alarming."
The peak body for life insurers, the Council of Australian Life Insurers (CALI), refused the ABC's request for an interview.
Instead, a spokeswoman from CALI pointed to the industry's self-regulated new Life Insurance Code of Practice, which comes into effect in July.
She said the code has specific obligations for funeral insurers such as the need to clearly explain the policy is insurance not a savings plan, and that the total premiums could be more than the benefits paid.
It also states funeral insurers must take "additional care when dealing with people of Aboriginal or Torres Strait Islander status about Funeral Insurance or other Life Insurance Policies to ensure their consent is genuine."
In 2021, comparison website Canstar noted in its last assessment of funeral insurance that a number of products had been restructured or removed from the market.
None of the products offered caps at the sum insured amount, which was a factor in Canstar determining none of them were worthy of a 5-star rating.
"These caps ensure that consumers don’t pay more in premiums than the amount of cover they have taken out," Canstar noted on its website.
"While this aspect alone did not prevent products from receiving a 5-star rating, after considering all factors, Canstar Research has determined that none of the products assessed met the standard required to achieve a 5-star rating."
The eight funeral insurance providers Canstar deemed not up to scratch were APIA, Aus Seniors Insurance Agency, Guardian Insurance, Insuranceline, Medibank, Real Insurance, Suncorp Life and Woolworths.
Medibank told the ABC it had since introduced caps. The company will also stop selling any new funeral insurance policies from July.
TAL,which is the parent company for Insuranceline, said it had offered customers a "value promise" since 2018, which allows customers to choose a 70 per cent or 100 per cent option. If a customer chooses 100 per cent their payout will be their cover amount or 100 per cent of their premiums paid (whichever is greater). TAL said the same polices had been in place at Suncorp Life and Apia since 2019 — which it also owns.
Ms Heir said while policy details varied between insurers, overall the product caused harm and stress and should not be sold.
"The issues that we see are similar to what we saw before the collapse of Youpla, people paying more than the benefit, or, it getting to the point where it's unaffordable, so that people have to cancel and they lose everything," Ms Heir said.
"We think it's really time to start thinking about whether or not these products should be sold at all.
"Particularly, in the environment that we're living in now, with the cost of living increasing, often these premiums are increasing, but people's income is not."
Funeral insurers 'not telling the truth'
Seventy-two-year-old Gill Brown took out funeral insurance with Insuranceline for herself, her husband Alan and daughter Lauren in 2003.
"The commercial ran on TV several times when I was at home, by myself, I was recovering from pneumonia," Ms Brown said.
"I felt vulnerable and thought, well, it seemed like a good idea."
Ms Brown said her premiums were originally about $30 a fortnight and she was told they would increase to $90.01 a fortnight before she lodged a dispute with the company.
Insuranceline, or TAL, originally agreed to reduce her premiums to $66 a fortnight, while also slashing the Browns' amount of funeral cover from $15,000 each to $9,500 each.
After Ms Brown rejected that offer, TAL made a final offer this week of $15 fortnightly premiums for $9,500 of cover each.
The family has already paid $21,800 to TAL, but by their estimates, they would have to pay a total of about $28,000 by the time Gill is 90 and her premiums stop. Their total benefit is only worth $19,000. The company cancelled their daughter's policy when she turned 18.
Ms Brown is telling her story in the hope of protecting others from what she calls an insurance "rort".
She echoes the advice of consumer advocates who recommend against taking out funeral insurance, or pre-paid funerals, where the company not the consumer benefits from any interest earned on money paid.
One example is ASX-listed funeral plan provider Invocare, which usually makes investment profits off the consumers' money it holds. However, after last year's share and bond market dive the company reported a loss in its most recent earnings.
Funeral providers that offer pre-paid funeral plans or bonds have also been criticised for overcharging customers and charging fees for no service.
There is also a risk funeral polices are not claimed.
Instead, consumer advocates recommend banking funeral savings in your own high interest account — something Ms Brown wishes she had known before taking out a policy with Insuranceline.
If she is unable to reach an agreement with TAL, her other option would be to cancel the policy and lose the money the couple has already paid.
"The longer you live, the more they rip you off," Ms Brown said.
"I feel as if they're cheating everybody, and not telling the truth up-front about how much it eventually will cost people.
"Now, every time I see one of the ads, I just am so angry and hurt that they're still able to do it."
'Stop them ripping people off'
TAL agreed to reduce Mr Cail's funeral premiums to $2.20 a fortnight, after he told his story to his local newspaper last year.
"If I cancel the policy, then I'm not covered, and my mother's not covered," he said.
The company also agreed to give him a partial refund of $3,785.
Mr Cail said he would rather get his money back and set it aside to pay for he and his mother's funerals, and is worried about what will happen to his funeral insurance policy after he dies.
"It's a terminal case, I'm going to die of cancer," Mr Cail said.
"But because my mum's 94 In July, I don't want to go before her.
"So I think that's the reason why I'm still here."
Before his time comes, he wants to see the funeral insurance industry overhauled.
"The government needs to step in and put more regulation on the companies, and stop them ripping people off."
Insuranceline and its parent company TAL also declined the ABC's request for an interview, and would not provide specific data about the company's policyholder numbers, cancellations, and premiums collected compared to claims paid out.
A spokeswoman said 99 per cent of all claims made by customers are granted, and within 48 hours of the claim.
She said the company paid $70 million in funeral insurance last year, but would not say how much TAL collected in premiums.
"It is the nature of insurance that some customers will have paid less in premiums when they claim, and others will have paid more in premiums when they claim," she said.
If you need help with your funeral insurance policy, you can contact a financial counsellor from the National Debt Helpline. They offer free and independent financial advice.
