Government to Spend $100 Million Compensating Customers of Failed Funeral Insurer

Indigenous dancers perform during a Smoking Ceremony during the state funeral service for Uncle Jack Charles at Hamer Hall in Melbourne, Australia, on Oct. 18, 2022. AAP Image/Diego Fedele

Customers of failed funeral insurance company Youpla—previously known as the Aboriginal Community Benefit Fund (ACBF)—will be compensated by the federal government at a cost of almost $100 million (US$64 million).

The company was allowed to deduct premiums from customers’ Centrelink payments for 16 years, between 2001 and 2017, despite being brought before the courts on multiple occasions for false and misleading conduct, and for breaking anti-hawking laws, which prohibit unsolicited marketing and sales of financial products.

For instance, in 1999, the Australian Securities and Investment Commission (ASIC) alleged ACBF had been “unconscionable, misleading and deceptive” to Indigenous customers, including by having salespeople visit Indigenous communities without appropriate permission and using the Aboriginal flag to falsely represent that it was Indigenous-owned.

This was settled out of court, and the company was ordered to change its marketing material to include a disclaimer stating that it was a private company not connected with any Aboriginal or government organisation.

However, the company was not required to change its name or logo.

Was Not an Aboriginal Company, But Marketed Itself as One

While its name and use of high-profile Indigenous spokespeople such as NRL star Jamal Idris conveyed the impression the company was Aboriginal-owned and operated, in truth, it was 90 percent owned by UK-born businessman Ron Pattenden, who remained linked to the company until 2020.

The Royal Commission criticised its new chief executive Bryn Jones for the company’s exploitative treatment of Indigenous customers.

In the final report, Commissioner Kenneth Hayne concluded that “Aboriginal and Torres Strait Islander people, especially those living regionally or remotely, may have been particularly likely to be sold funeral insurance policies in circumstances where those policies held little value for them.

“I consider that ACBF may have breached its obligations … to not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive,” he said.

Castigated by the Royal Commission into Banking

Thousands of customers, unaware of the lapse in coverage following ACBF’s prohibition from the Centrepay system, were left without insurance despite continuing to have their funeral insurance premiums deducted from their Centrelink payments, according to the Royal Commission.

A ban on ACBF and other funeral insurance companies accessing the Centrepay system was to have applied from July 1, 2016, but the company mounted a legal challenge and initially won. However, that was overturned on appeal.

The company later admitted that it had “lost” the details of 6,000 customers as a result of not being able to access Centrepay, and those people were left without cover.

The company was also denied an Australian Financial Services Licence (AFSL), required for businesses that provide financial services.

It finally collapsed in March 2022, by which time it had rebranded as Youpla.

That left an estimated 13,000 people who had paid premiums—some since the company was founded in the 1990s—without insurance coverage.

They gained some relief on Feb. 9 with an announcement that the Federal government will fund a $97 million scheme that comes into effect in July and covers anyone who held an active policy on or after Aug. 1, 2015.

Youpla’s customers will be eligible to receive a payment of 60 percent of their premiums, capped at the value of their insurance pay-out, or can opt instead for a low-risk regulated funeral bond.

They will also be able to access financial counselling under the Youpla Support Program.

At the time of its collapse in 2022, liquidators SV Partners said 8,503 customers were paying for the coverage of 14,555 people.

ASIC to Prosecute Directors

ASIC took Youpla to court in 2023 for false and misleading conduct between 2015 and 2018, accusing it of misleading its customers by claiming to be Aboriginal-owned and run. The insurance company was not represented.

The court fined the company $1.2 million—much less than the $7.5 million the regulator had sought—and only for falsely claiming it would pay out a specific figure, rather than just the cost of a funeral.

ASIC failed to prove any of its allegations of misleading customers as to ownership. It is unlikely the fine will be paid since the company was by then in liquidation.

ASIC is currently pursuing civil action against five former directors of Youpla—including Mr. Pattenden—for breaches of their duties.

“First Nations people took up policies with ACBF to ensure their family members had cover for their funeral expenses,” ASIC Deputy Chair Sarah Court said in a statement.

“ASIC alleges the defendants maintained the arrangement with Crown [a Vanuatu-based company part-owned by Mr. Pattenden], which moved funds into an overseas company owned and controlled by two of the directors and did not act in the best interest of the ACBF Entities and members.”

Before announcing the fund today, the government had established a temporary scheme for eligible ACBF customers to pay for the funeral of anyone who had a policy with the company as of April 1, 2020.

Nearly 300 applications had been approved to a value of $2,413,491, as of August 31, 2023.