A funeral insurance customer who was not told her policy had stepped premiums will receive a partial refund.

A welcome letter and policy schedule did not state prices would rise with age, and it was “unfair and misleading for the insurer to sell the policy without giving a clear explanation about how premiums would increase”, the Australian Financial Complaints Authority says.

The ombudsman says Hannover Life Re can retain prices at the starting premium rate and in relation to increases in the sum insured. It must refund the balance plus interest and pay $1000 compensation for non-financial loss over a call in 2022 when the insured sought to cancel the policy and met with “unfair retention practices”.

The ombudsman is not satisfied the woman was misled or unfairly pressured into the policy sale generally.

The disability pensioner bought the policy in 2012 after seeing a TV advertisement.

She could not remember the initial sales call and Hannover Life Re did not have a recording of it, but it did have later call recordings showing the woman did not understand the premiums would rise with age, and that she had difficulty paying them.

In 2012, the monthly premium was $26.16 for $8000 of cover, but by 2022 it had risen to $73.54 for $12,411 of cover.

The ombudsman points to a 2015 report from the Australian Securities and Investments Commission highlighting that funeral insurance premiums tend to rise steeply for the over-50s and many cancel their policies in the first few years.

In 2018, the financial services royal commission criticised funeral insurance, citing data that suggested the policies provided little value to consumers. 

Read the ruling here.