How do you address the costly business of funerals for those that can’t afford them? SVA and a host of unlikely partners might just have nailed it with an initiative tackling both funeral costs and the way people save.
Jacelyn’s* mother died unexpectedly in 2017 of advanced stage breast cancer. Amid the grief, Jacelyn felt some relief knowing her mother had taken out funeral insurance many years ago. When she reached out to the insurance company, Jacelyn who was unenemployed received another shock – there would be no insurance payout. Despite having held the policy for over two decades and contributing fortnightly, her mother missed premium payments when she fell ill, and the policy was cancelled.
Jacelyn had to take out a loan from the local funeral provider for $7,400, the cost of her mother’s funeral. The interest rate on the loan was 10%. She expects to be paying off the loan for years to come, an immense financial stress on top of grieving the loss of her mother.
Unfortunately, this story is common across Australia, in particular within Aboriginal and Torres Strait Islander communities.
In 2017, as calls for a royal commission into the banking and financial services industry were growing, stories of this kind were top of mind for the Financial Inclusion Action Planning (‘FIAP’) working group, made up of consumer organisations, government bodies and financial services companies. Given the way some communities were being encouraged to use funeral insurance, the group proposed a new, fairer financial product to respond to these concerns.
Social Ventures Australia (SVA) was engaged to review the funeral landscape and consider options. It became clear that the development of a new financial product alone would not solve the challenges of financial hardship created by funerals.
A viable, longer-term solution would need to address both issues. It would require making funerals more affordable, as well as providing a fairer, more achievable pathway for individuals and families to prepare financially.
* Name and details changed slightly to protect individuals’ identity