Canberra called (I said NO)

"You've been invited to Canberra this week to attend a Senate inquiry," announced my PA, Kathryn.

"Let me think about that," I replied.

Pause.

"Actually ... I'd rather buy funeral insurance."

This inquiry would be like a tacky theatre restaurant, except the waiters are on $180,000 and the ending has already been rehearsed.

The topic?

Reducing the Capital Gains Tax discount for property investors.

So here's what I'd say if I went, which is precisely why I won't:

"I strongly encourage you to pass laws that will make the value of my house go down."

Can you imagine the headlines?

"BAREFOOT INVESTOR PLEADS: 'MAKE ME POOR!'"

And I mean it.

Right now I get a 50 percent discount on the tax I pay when I sell an investment property. Meanwhile, Kathryn pays full freight on every dollar she earns answering my emails.

She's 32. Still living with her mum. Jokes about putting a tiny house on my back paddock.

She's not joking.

Two-thirds of voters own homes. Politicians know the maths. So they won't say this out loud: the tax system props up the housing market. It rewards people who already got in.

Cut the discount and politicians get to look brave. They get to say they've "taken on investors." And Canberra pockets more tax. 

Beautiful.

But don't let them keep it. Instead, use it to lower income taxes. Stop taxing effort harder than a property gain.

Cut the discount.

My property drops in value? I'll cope.

Kathryn gets a shot at a roof over her head, and keeps more of her pay?

Worth it.

Tread Your Own Path!

Funeral Insurer TAL Kills Off Husband

Hi Scott,

Thank you for taking on Bill and Wendy’s funeral insurance nightmare last week. My mum died last year. That’s when I discovered she’d been paying funeral insurance for decades – I think she paid for her funeral twenty times over. She wanted “a very simple affair”. Instead, the insurance company got rich. How many other families are discovering this after their parents die?

Tash

Hi Tash,

I’m sorry for the loss of your mum, and your mum’s loss.

How many elderly people are stuck in this trap?

The insurers won’t tell us, but I suspect it’s in the (many) thousands.

This week Wendy called me in a bit of a flap.

“Scott, I just received an email from TAL telling me how sad they are that Bill died.”

Bill has not one but two terminal diagnoses.

Now imagine your wife of 60 years opening that email.

Getting paid out the benefit automatically triggered a “we care deeply” templated email from TAL – the same company that’s been bleeding them dry for years with a funeral insurance policy they should never have sold in the first place.

Still, when big companies are this stupid, you have to laugh.

“Wendy, please go give Bill a prod for me … make sure the old bugger is still with us”, I joked.

She put down the phone for a moment.

“Yes, he’s watching a movie. Very much alive”, she laughed.

Big companies do dumb things. Their systems and processes – and profit targets – blind them from behaving like decent humans. They forget that those profits come from someone’s scared grandparent. 

TAL don’t need their money.They just want it.

Barefoot finally gets into crypto

“You got balls”, said my editor, shaking their head.

I’d just told them about a conversation I’d had with Australia’s biggest life insurer, TAL.

Last week I answered a question from Bill and Wendy. Bill is 88, on life support, dying. Wendy is 79. They’re on the aged pension, renting, and handing over $304 a fortnight for a funeral insurance policy they took out in 2010.

Let me explain funeral insurance:

It’s the ‘Ab-Zapper 3000’ of the finance industry.

“Simply clamp these jumper cables to your muffin top and taser yourself into a six-pack! All for four easy payments … but wait, there’s more!”

Financial advisors wouldn’t give it a second look for their clients. So, instead, insurance companies go direct to Aussie lounge rooms, flogging it in ads to lure unsuspecting oldies watching Larry Emdur interview a psychic dog.

The people who buy it are battlers … kind-hearted, loving ones. They don’t own a house. They don’t have super to cover funeral costs. They sign up because they don’t want to burden their kids.

That’s their motivation. 

Yet the BMW-driving finance bro who dreamed this up? 

His motivation was earning a big, fat bonus.

Here’s the design: premiums start low. Then they ‘step up’ every year as you get sicker and broker. In other words, customers pay the most when they can afford the least.

And here’s the trap: cancel at any point – even after years of paying – and you lose everything.

My view?

Funeral insurance was created by rich people to exploit poor people.

Well, this week I officially became Bill and Wendy’s financial counsellor.

And I fight for my clients. 

Hard.

And that’s how I ended up in a ‘ballsy’ conversation with a TAL representative this week.

“Scott, you’ve already made up your mind. You’re saying our product is predatory and unconscionable”, argued the TAL representative.

“Bloody oath”, I said.

When Bill and Wendy signed up in 2010, it cost $41 a fortnight. In March, it rises to $304.

They’ve already paid in almost as much as the funeral payout.

If Wendy cancels now, she gets nothing back. So she keeps paying.

Which means she has a choice:

She can turn on the air-con for her dying husband.

Or she can keep the insurance.

Not both.

That ain’t bad luck ... that’s exactly the way the product was designed.

“And that is the trap your company built”, I said to the TAL rep.

“Well, you’re hardly independent”, she fired back.

“Look, I’m the only one who’s truly independent here: you’re banking their cash, Wendy and Bill are paying it … I’m doing this for free.”

“So what do you want?” the TAL rep snapped.

“I want all their premiums repaid”, I said calmly.

“All of them?” she scoffed.

“With interest.”

Tread Your Own Path!

P.S. A statement From TAL: 

“We are deeply saddened to hear of Wendy and Bill’s situation and do not want to add to their worry at what must be an incredibly difficult time. We have worked with Wendy and Bill and agreed an outcome that we hope provides them with the support they need.”

(And I can confirm that Wendy and Bill are delighted with the offer they were given.) 

TAL also stated: “We ceased selling stepped premium funeral insurance products in 2013.”

Nice.

Yet what they didn’t state was they’re still collecting the air-conditioning money from all the Wendys and Bills who signed up years ago. If you’re stuck in one of these policies, speak to a financial counsellor at the National Debt Helpline on 1800 007 007. 

The Grave Robbers

Scott,

My husband Bill (88) and I (79) are on the aged pension and have been paying  funeral insurance for many years. It started under $100 per fortnight. Now it's $304, going up to $330 in March. Coverage is $22,000 each. Bill has two terminal illnesses and is on life support with portable oxygen. We pay rent from our pension and have almost nothing left.  Is there any way to stop this?

Wendy

Hi Wendy,

Reading your question has brought tears to my eyes.

The only reason you took out funeral insurance is because you didn’t want to be a burden on your loved ones. And these financial parasites are sucking you dry.

You've almost paid more in premiums than the $22,000 payout. If you'd put that money in a bank account earning 3%, you'd have enough for a funeral and money left over. Yet if you cancel, you get nothing back. They keep every cent you've paid.

How do they do this?

They buy ads on day time TV, and target pensioners with fear, lock them into contracts that bleed them dry, and count on people like you being too tired, too sick, too broke, or too scared to fight back.

Well, screw them.

They're taking $304 a fortnight from a couple on the aged pension with a dying husband on life support.

You're probably thinking, "But I'm 79, Bill's dying, and I don't have the energy."

That may be true, but I do.

I'll take this on personally. We're going to lodge a complaint with AFCA (Australian Financial Complaints Authority). AFCA has the power to force them to refund your premiums. It won't be easy, but I've helped other pensioners get their money back.

Let’s fight these bastards.

They’re Coming Out of the Woodwork

Hi Scott,

I’ve just read your article entitled “The Horses”. My wife was tricked into buying an almost identical funeral insurance policy from Insuranceline. We estimate we have paid $35,000 in premiums since 2007, with a payout cover of just $6,000 each. My wife and I are now in our seventies, with the age pension as our only income. And, as you know, they keep increasing premiums as we get older. I’m stressed. What can we do?

Ted and Eileen

Hello Ted and Eileen,

I’m used to getting a lot of emails.

Yet I’ve been blown away by the number of people who’ve written to me in a similar situation to you.

Your wife entered into this financial transaction not out of greed but out of kindness and selflessness:

She didn’t want to be a financial burden on her family.

Sadly, too many insurance companies manipulate this emotion for their own gain.

The problem is that, in some cases, if you stop paying the rising premiums you can lose your cover (though you should definitely check the wording in your policy, or call a financial counsellor on 1800 007 007 to help you with it).

Yet if you keep paying you may not be able to afford to travel and see your grandkids. Or do Christmas presents.

The irony is that if you were to speak to your family, you’d find they’d rather you spend the money enjoying yourself than living your final years being stressed out about money.

Besides, a private funeral typically costs around $4,000 for a basic cremation, or up to $15,000 for a more elaborate burial, according to ASIC’s MoneySmart.

I’d encourage you to make a formal complaint to the insurer in writing, and if you don’t get an appropriate outcome take it up with the Australian Financial Complaints Authority (ACFA) on 1800 931 678.

The Horses

Dear Scott,

My mother-in-law took out funeral insurance way back in 2004. Since then she has paid approximately $29,000 ($72 per fortnight), but if she were to die the payout would be $17,700. I cannot find a legal way to get them to stop taking more of her money. They will stop when she is 90, but sadly she is 70 and has Parkinson’s. Any ideas?

Sarah

Hi Sarah,

You know what I dislike more than those mindless morning television shows?

The ads that pay for them.

A big infomercial flogger is funeral insurance, and they really press on your emotions to ‘not be a burden to your family’. The Royal Commission showed that the companies that sell this type of insurance are the WORST.

Let me count the ways:

First, you often end up paying more in premiums than the value of the cover.

Second, the premiums often rise as you get older, when you can least afford them.

Third, if you stop paying, in most cases, you won’t get your money back.

Fourth, if your mother-in-law had invested $72 a fortnight into a low-cost index fund for the last 16 years, she’d have $63,000 by now. That could afford a helluva funeral (she could even have Daryl Braithwaite tow her coffin out on a horse while singing The Horses).

So what can she do?

Well, these products are often sold by slick salespeople with predatory practices. If that happened to her, she may be entitled to a resolution.

You’re thinking “but my mother-in-law is a pensioner with Parkinson’s, she won’t stand a chance”. And that’s why I want you to put me in contact with her this week, and I’ll take this on personally.

It’s time to whip these nags!