The UK funeral industry opinions are seemingly largely in favour of HM Treasury’s (HMT) announcement on funeral plan regulation.
On the face of it experts in the sector mostly agree with the Government’s plans to introduce statutory regulation to the pre-paid funeral plan market – which is the culmination of an enquiry by HMT some time ago.
This month, HMT issued their consultation on a policy proposal regarding the regulation of pre-paid funeral plans which outlined a funeral regulation model under the Financial Conduct Authority (FCA).
In June 2018, the Government launched a call for evidence on the regulation of the sector following concerns about the risk of consumer detriment in the pre-paid funeral market sector.
The aim of the investigation was to gather views and information on how the funeral plan market currently operates and the Government’s initial policy proposal to bring all funeral plan providers under the responsibility of the FCA to strengthen the regulatory framework.
The call for evidence responses confirmed that unfair customer treatment was present within the market and opinions gathered indicated a broad demand for the sector to come under compulsory regulation.
Following the responses and talks with sector stakeholders, the Government stood firm on their position of bringing funeral plan providers under the remit of the FCA as they believed it would be the most effective way of strengthening the regulation of the market.
Furthermore, last year, Competition and Market’s Authority (CMA) began a separate study into the UK funeral sector which aims to understand the transparency problems around how funerals are delivered to the public.
Late last year, ‘ITV News Show UK’ revealed that consumers are spending billions of pounds for funerals before they pass away – and figures obtained by the show strongly indicated that customers are keen to ‘buy before they die’ in order to avoid the rising cost of their own funeral.
Consumers are even resorting to crowdfunded funerals in desperation due to rising funeral costs. A market study carried out by CMA in 2018 revealed funeral costs had increased by two-thirds in the previous ten years.
SunLife released their ‘Cost of Dying report’ which gives a complete view of funeral costs over time. The findings reveal that the cost of a funeral in 2018 was £4,271 which marks a 4.7% jump since 2017 (£4,078), which is a 67.5% increase in the past ten years (average funeral in 2008 was £2,549).
The total cost of dying in 2018 was £9,204, an increase of 3.4% since 2017 when it was £8,905 and a 57.1% increase since 2007 (when the cost was £5,858).
In light of the HMT’s policy proposal, industry experts share their thoughts.
The largest provider of probate and estate administration services in England and Wales, Co-op, responded favourably to HM Treasury’s announcement on funeral plan regulation. In a statement, they said:
“Funeral plans are an increasingly popular way for people to manage their own funeral arrangements and importantly can help manage the cost for families. But not all funeral plans are the same and some sectors of the market have not been working well for consumers.
“As the UK’s leading funeral provider we have been calling for some time for greater regulation in the market and for a future regulation model under the FCA.
“We welcome the move today by HM Treasury to seek to provide greater financial protection to the 200,000 consumers who invest in these plans annually, and look forward to engaging fully with the consultation.”
However, the Funeral Planning Authority (FPA) strongly oppose the proposal in a statement saying:
“The FPA is extremely disappointed with the conclusions from this call for evidence. It is our belief that HM Treasury has settled on the FCA as a solution for reasons of political expedience, yet the problem and the solution itself are both largely undefined. After 10 months of consideration, this lack of clarity and thought is deeply disappointing.
“The original consultation was prompted by concerns around sales processes, and money available to pay for funerals when they were needed. These concerns were principally related to the 5% of the market not regulated by the FPA.
“Since the consultation began, we have seen the implementation of GDPR, which has driven significant improvements in how firms use personal data, and the permissions around that data (for sales purposes). Therefore, the primary concern must be prudential issues; is there enough money set aside, and is it being managed appropriately to provide the funeral when needed. Prudential challenges like this are not the FCA’s area of focus, and furthermore, this market is significantly smaller than any other market they regulate, meaning it is likely to get far less scrutiny.
“The outcome of this decision means increased costs for customers, as the greater cost of regulation will drive out smaller providers from the market. Customers will also be put at risk by reduced oversight of funeral plan providers, and a lengthy transition period where bad practice could happen among plan providers, without fear of reprisal. The response from HMT is implicit about customer detriment happening currently but goes no way to quantify this, and shows lack of understanding of the risks posed in future following this decision. The proposed new regime also appears completely disjointed, as there has been no co-ordination between HMT and the CMA, who are currently investigating the funeral sector as a whole.”
They further added:
“We suggested the government could make the FPA the statutory regulator; an option supported by the vast majority of the market, including providers not currently registered with us. This outcome is so much better for customers; giving them greater reassurance, protection and choice. We are deeply disappointed that this appears to have been disregarded by HMT.”
Meanwhile, the UK’s largest independent funeral plan provider, Golden Charter welcomes FCA regulation of pre-paid funeral plans as a positive step forward for customers, funeral directors and financial advisers. They said of the enquiry that
“HM Treasury found examples of ‘customer detriment’ in many aspects of the funeral market…”, but strongly pointed out “that these occurred primarily in the section of the market not supervised by the Funeral Planning Authority (FPA).”
Suzanne Grahame, Chief Executive at Golden Charter responded to the HMT’s announcement. She said:
“HM Treasury’s decision for the Financial Conduct Authority (FCA) to regulate pre-paid funeral plans is a positive step forward for funeral directors, financial intermediaries, and customers and we welcome it.
“This is an announcement we have been requesting and preparing for since the start of last year. Golden Charter has been leading the way in ensuring that our funeral plans can only be purchased through highly trained subject matter experts, with our approach to third party sellers requiring them to be FCA regulated or members of a recognised professional body. The strong relationships we have sought and developed with our adviser networks is testament to that approach.
“As a result, we have remained ahead of our competitors in our approach to sales quality and we think we’re the best placed company to continue to provide pre-need options for customers in the new environment.
“While we still do not yet have the full information on how the new system will operate, the proposal published describes in some detail the close parallels to be drawn with other FCA regulated markets such as the insurance sector. To that extent, this is largely a known model and one we have been planning for since 2017. A great deal of work has been undertaken in recent years to ensure we are in a strong position to respond to any new regulatory regime or requirements and this will now come to fruition.
“As more information on the new regulatory framework becomes available, we will review the options available for the many Will writers who currently offer Golden Charter funeral plans to their clients. We are confident we are developing the right approach to ensure a smooth transition to FCA regulation.
“This announcement is an important step forward. Regulation will improve the quality of the sales experience for customers and offer greater protection. It will increase security for individuals while simultaneously enhancing the reputation of the industry and that can only be a good thing.”
UK Independent funeral directors, The National Society of Allied and Independent Funeral Directors (SAIF) also welcome the news that Treasury is planning to introduce statutory regulation of the funeral planning market. Terry Tennens, chief executive of SAIF said:
“Our Regulatory Task Group will be preparing a response to the proposals in the coming weeks.
“We hold the view that regulation – in a form which is easily understandable and set in the right framework – is a positive move.
“Consumers are right to expect to be sold plans which they do not feel pressured into buying, a situation which is ultimately not good for people buying the plans or, indeed, the funeral directors who will be servicing them.
“We would always wish for funeral plan providers and any intermediaries to conduct themselves in a manner in which the needs of the consumer are paramount and that aggressive sales methods are not employed.
“People also need to be safe in the knowledge that any plan they buy will sufficiently cover the costs of the type of funeral they have chosen……”
Leading funeral services provider Dignity has welcomed the news that funeral plans will be regulated by the FCA. In a statement, they said:
“The announcement, made by HM Treasury this week, follows a consultation into the pre-paid funeral plans sector. Dignity has been campaigning for greater regulation of the sector in a bid to protect consumers from misleading advertising and aggressive sales methods.”
Mike McCollum, Chief Executive at Dignity said:
“We welcome funeral plan regulation by the FCA and believe it will deliver stronger protections and a better service for consumers.
“A clampdown on poor practice is something Dignity has long called for and it was our research with Fairer Finance that prompted the government to conduct its review into the sector.
The next two years of transition to FCA regulation may create some uncertainty and confusion for people who hold, or wish to purchase, a funeral plan so it will be important that government and the sector work together to support consumers.”
As a Wills and probate professional, what is your view of the HM Treasury’s announcement on funeral plan regulation?
