The Long-term Insurance Amendment Bill tackles a key issue in the funeral insurance market: consumers paying for multiple funeral policies without fully understanding the limitations on additional benefits. We unpack what the Bill seeks to change, why it matters and how insurers can prepare.
Consumers who hold multiple funeral policies may not always understand how benefit limits affect the final payout. As a result, they could end up paying for additional cover that does not deliver the extra financial benefit they expect.
The Long-term Insurance Amendment Bill (B17–2026) seeks to address this concern by proposing amendments to Section 62 of the Long-term Insurance Act. Specifically, the Bill focuses on situations where multiple funeral policies issued by the same long-term insurer cover the same beneficiary and life event. In this article, references to multiple funeral policies refer to policies that meet these criteria.
The changes aim to ensure affected policyholders understand the costs, maximum benefits and limitations of their policies before taking out additional cover, rather than potentially discovering these limitations when they submit a claim.
While the Bill has not yet been enacted and may change as it progresses through the legislative process, funeral insurers should familiarise themselves with the changes it could introduce and consider the potential impact on their businesses.
Why are multiple funeral policies a concern?
Consumers may take out multiple funeral policies believing that each policy will provide an additional benefit when a claim is made. However, benefit limitations can mean that additional cover does not necessarily translate into the additional payout they expect.
A policyholder could therefore continue paying premiums for an extended period without fully understanding the implications, only to discover at claim stage that the additional cover does not increase the expected benefit.
The Bill seeks to address this by placing greater responsibility on insurers to identify relevant multiple policies and ensure customers understand the implications before taking out further cover.
What does the Bill propose?
If enacted in its current form, the Bill will require the Financial Sector Conduct Authority (FSCA) to prescribe rules to protect policyholders who hold multiple funeral policies for the same beneficiaries.
Among other things, these rules must require long-term insurers to enquire into and develop systems to identify whether an intended beneficiary is already covered under another funeral policy issued by that insurer.
Where multiple cover is identified, the insurer will need to make the applicant aware of the implications, including the costs of the policies, the maximum value of the benefits payable and any limitations that may apply. The relevant advice must also be provided in writing to affected beneficiaries.
The Bill also addresses existing policies. Within 12 months after the Amendment Act comes into effect, insurers offering funeral policies will be required to extend a written offer to relevant existing policyholders or beneficiaries to disclose the costs, maximum benefits and benefit limitations associated with their policies.
The proposals do not prohibit consumers from holding multiple funeral policies. Instead, they aim to give consumers enough information to understand what they are paying for and make an informed decision about whether to retain their policies.
Affected policyholders will also have the right to cancel a funeral policy held for the same life event within 31 days after receiving the required advice. In addition, failure to disclose another funeral policy offering benefits for the same life event will not affect the validity of the affected policies.
Non-compliance could also have financial consequences for insurers. Depending on the circumstances, an affected policy may be cancelled, and the insurer may have to refund premiums or other monies paid, subject to the provisions and limits in the legislation.
Supporting better customer outcomes
The Bill is another example of how financial sector regulation increasingly aligns with the principles of Treating Customers Fairly (TCF). While TCF is not explicitly mentioned, the requirements in the Bill support several TCF Outcomes.
TCF Outcome 3 requires customers to receive clear information and be kept appropriately informed before, during and after the point of sale. Requiring greater transparency about the costs, benefits and limitations of multiple funeral policies supports this outcome.
TCF Outcome 5, which provides that products should perform as customers have been led to expect, is also relevant. Customers considering additional funeral cover should understand any limitations that could affect the benefit they expect to receive.
The cancellation set out in the Bill also align with TCF Outcome 6, which seeks to ensure customers do not face unreasonable post-sale barriers when they want to change a product, switch providers, submit a claim or make a complaint.
Importantly, the amendments seek to address potential poor customer outcomes earlier, rather than allowing customers to discover unexpected limitations when they claim.
What could the changes mean for the industry?
The changes could have implications across several areas of a funeral insurer’s business. Identifying multiple policies may affect policy administration systems and how beneficiary information is captured and linked. The new disclosure requirements could also affect sales processes and customer communications, while the provisions relating to existing policies may create additional administrative demands.
The impact is therefore likely to extend beyond compliance teams to areas such as IT, operations, sales and customer service.
While the proposed obligations are primarily directed at long-term insurers, advisers and intermediaries who sell funeral policies are also likely to be affected in practice. They should understand the insurer’s processes and the information that must be communicated to affected customers, while continuing to meet their existing advice, disclosure and record-keeping responsibilities.
How can insurers prepare?
Although the Bill is still progressing through the legislative process, insurers can start assessing their readiness by considering four key areas.
First, assess whether existing systems and data can reliably identify the multiple policies. This can help highlight any gaps in how beneficiary information is captured, linked or checked.
Second, review sales and disclosure processes. Consider whether customers are clearly informed about the costs, benefits and limitations of additional funeral cover and whether appropriate records are maintained. Insurers should also consider how they would communicate with affected customers in their existing books and manage resulting cancellations or refunds.
Third, consider training needs. Employees involved in sales, servicing and claims should understand both the Bill’s requirements and the customer risks they seek to address.
Finally, look beyond minimum compliance. As a matter of good business practice and TCF, insurers can consider whether their existing controls identify other situations where customers may misunderstand the value or benefits of their cover. Addressing these risks proactively can help prevent poor customer outcomes.
As the Bill progresses, insurers should continue monitoring developments and reassess their preparations once the final requirements and supporting rules become clearer.
Preparing for greater policyholder protection
The Long-term Insurance Amendment Bill reflects a continued regulatory focus on ensuring that financial products deliver the outcomes customers reasonably expect.
For funeral insurers, preparing early can help identify gaps in systems and processes before the final requirements take effect.
More importantly, applying the principles behind the Bill and TCF can help prevent poor customer outcomes by ensuring consumers understand the cover they are paying for and the benefits they can expect to receive.