The Australian Securities and Investments Commission (ASIC) has spelled out new obligations for funeral cover providers as Hayne royal commission reforms take effect this month.

Funeral expenses policies were previously exempt from being a financial product under the Corporations Act, leaving consumers exposed to such practices as high-pressure telephone sales.

Providers, distributors and advisers who don’t have an Australian Financial Services (AFS) licence must now obtain one before issuing funeral cover products, while existing licensees will need to comply with additional obligations from the end of this year.

“ASIC can take enforcement action if you breach your obligations as an AFS licensee,” the regulator says.

Funeral expenses facilities captured by the reforms include insurance products and non-insurance arrangements that enable a client to manage financial risks relating to funeral services.

The changes do not affect prepaid agreements with funeral service providers.