The Federal Government has announced a $97 million financial resolution scheme for policyholders of failed funeral insurer Youpla Group.

Under the two-year Youpla Support Program, eligible recipients will be offered a resolution payment assessed at 60% of premiums paid, up to the value of the insurance. They will get either a low-risk prudentially regulated funeral bond or a cash payment.

Youpla collapsed in 2022, leaving its Indigenous policyholders and their beneficiaries in limbo.

The business was exposed at the 2018 Hayne royal commission over its use of high-pressure tactics to sell near-worthless products to Indigenous communities.

After the collapse, the Federal Government created an interim scheme for the beneficiaries of Youpla policyholders to claim a grant covering immediate funeral expenses. The Youpla Group Funeral Benefits Program will cease taking applications on June 30.

The new program will start accepting applications on July 1 and is expected to help more than 13,000 people recover from financial loss.

“Losing loved ones can be one of the most traumatic events, made harder still for those First Nations people affected by the collapse of the Youpla funeral fund,” Minister for Indigenous Australians Linda Burney said. “This measure will hopefully bring peace of mind to thousands of families impacted by the collapse of the Youpla Group.”

The new program is for policyholders who held active policies on or after August 1 2015, when the Commonwealth removed Youpla from its Centrepay system. Many of Youpla’s Indigenous customers paid their premiums through auto deductions from their Centrelink benefits.

Last year, the Federal Court ruled Youpla and its related businesses misrepresented the sale and promotion of funeral expense insurance to Indigenous people. It imposed a $1.2 million penalty, in proceedings launched by the Australian Securities and Investments Commission.

But the court dismissed other allegations and the corporate regulator is appealing against one decision in relation to its claim Youpla falsely misrepresented that it was owned or managed by an Aboriginal person or people.