Archive for April 6th, 2018

Why is this Made in China stigma still rampant?

April 6, 2018

Interesting bit of news. Apparently, customers of a French  shoemaker have been miffed with Made it Italy replaced by Made in China: (more…)

Australia’s funeral insurance market…

April 6, 2018

Did not know one can avail insurance for funerals. But then trust financial/insurance industry to venture into anything. The human imagination to first make certain things very expensive and then design financial products around these things is quite something.

Anyways, came across this piece by Profs. Sandra van der Laan (University of Sydney) and Lee Moerman (University of Wollongong). They list several ways to pay for “expensive funerals.”

Paying for a funeral can be a financial hardship and there are options to pay for it.

One option is a direct committal that takes care of only the disposal and documentation requirements required for a funeral. Many funeral directors and online providers offer this budget option for as little as A$1,200, but more likely around A$1,800 in a large city such as Sydney or Melbourne. You can then entrust your relatives, or your executor (if this is indicated in your will), to celebrate your life in any way you wish, a memorial without the expense.

You could also buy a pre-need or prepaid funeral. This product is rigorously regulated by state consumer laws. It gives you some control as you know exactly what you are buying (such as ceremony, coffin, disposal). The only downfall is that your funeral is “locked-in” to a particular provider and stories of aggressive upselling to relatives have been reported.

In Australia, your loved ones or executor are able to access your funds in your bank or even superannuation accounts to pay for a funeral. If you are on a government benefit, your partner may receive a bereavement payment to contribute toward funeral expenses. Many funeral operators will also allow your relatives to pay for your funeral by instalments.

Funeral bonds are also financial products and depending on the amount you invest in bonds, you are likely to limit any financial legacy resulting from your funeral for relatives and loved ones. However, funeral bonds also carry the same risks as other bonds.

Funeral insurance providers attempt to sell peace of mind to consumers. However, that peace of mind can become a financial burden as you age and premiums increase. It also may not even be used for that send off that you had imagined.

They then discuss how funeral insurance products are taxing Australians:

Despite more consumer-friendly funeral insurance products entering the market in recent years, most policies have stepped premiums which increase as you get older. Funeral insurance sellers are also still engaged in aggressive selling techniques, such as offering a gift card for buying a policy.

These fundamental problems lead to high policy lapse rates. That is, consumers take out a policy and then cancel or the policy is cancelled by the insurer for non-payment of premiums. While this is not unusual, the very high lapse rates make selling funeral insurance very lucrative for insurance companies.

In 2014 the Australian Securities and Investments Commission (ASIC) reported there were nearly three quarters of a million Australians covered by funeral insurance with an average benefit amount of A$8,859. Given the findings of a 2017 report suggesting average cost of a moderate “full service” funeral is around A$6,000, it appears many Australians are over-insuring.

Wonder what will Michael Sandel say to something like funeral insurance?

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