Fairer Finance Reports on the Funeral Plan Market.
This report was sponsored by Dignity, who are the dominant force in the UK Funeral Plan Market, and in the Funeral Director market. Both their funeral plans and their funeral directors are expensive. They have seen their market share drop substantially over recent years and would like to make life difficult for the upstarts. Worst still some of these upstarts do things differently. Even worse, some of them are supporting independent funeral directors because they are much cheaper. And, for Dignity, if not for consumers, it gets worse.
One of the new breed of funeral plan companies is actually helping to train and set up new funeral directors and deliberately helping them to cut prices to end users. That will obviously have a massive impact on Dignities profits in the long run.
So please do read the report with that in mind, and remember that not everyone wants their plan to include environmentally unfriendly embalming (to preserve the body) or limousines when the family can use their own cars and divert hundreds from Dignities pockets. According to Dignity, everyone wants a service. We have news – it is a free market (still) and people can make their own choices. yes, they need to understand them, and anything which helps with that is to be welcomed.
One thing Dignity does not support is independent advice on the choice of funeral plans. They prefer to give vast commissions to people who can only sell their plans – from what we understand, they may earn 50% more than we do and they don’t have to do any research! Nor do we have salespeople or a call centre!! But here is the Fairer Finance Press Release: (get the salt out!)
Unregulated funeral plan market leaves millions of pounds of consumer money at risk.
The report, “Is the prepaid funeral planning market working well for consumers?” suggests there is significant evidence of mis-selling within the industry and that millions of pounds worth of consumers’ money could be at risk. Although the report was commissioned by Dignity, Fairer Finance retained full editorial control.
Funeral plans are an effective way for consumers to plan and pay for a funeral. Between 2006 and 2016 there has been a near fivefold increase in the number sold each year. As a result 1.2 million UK consumers now own a plan. It is believed that a significant proportion of this growth is due to websites purporting to be comparison sites combined with high pressure telesales tactics.
Funeral plans look and feel like a financial services product, but 75% of consumers wrongly believe their plan is regulated by the Financial Conduct Authority.
The report shows:
• There is evidence of persistent and high pressure sales practices often through aggressive third party sales intermediaries. A telephone survey of 1,001 adults over the age of 50 indicates that as many as 6 million people have been marketed to by funeral plan providers or their agents and nearly half (49%) of those contacted over the phone have been re-contacted 2 or more times, 46% agreed that they were being pushed to take out a plan when re-contacted and 63% felt this additional communication was not ‘useful’.
• Lack of clarity – Consumers do not understand the differences between plan types, are confused by industry terms and are unaware of the potential for and scale of extra costs, and other product exclusions. Over 90% of those identified as contribution style funeral plan holders wrongly thought their plan guarantees to pay for cremation costs when this was not the case.
• Mismatch of customer expectations – The research demonstrated that consumers tend not to understand what is and isn’t guaranteed by their plan. Customers buying these plans are often elderly and more vulnerable and not around to check whether the product met their expectations when a claim is made.
• Safety of consumer money – There is very poor transparency around what happens to customer money. While all money must be placed in a trust, or a whole of life policy, few providers are explicit about funding levels and where the money is invested. There is no safety net if a provider was to become insolvent.
• Lack of consumer protection – The industry is subject to voluntary regulation by the Financial Planning Authority. Some providers are not part of this voluntary regulation scheme. Third party sales firms are not even subject to voluntary regulation. Consumers do not have access to an Ombudsman service in the event their complaints are not resolved satisfactorily.
James Daley, Managing Director and Founder, Fairer Finance, said; “Funerals have become ever more expensive over the past decade, and pre-paid plans can be a great way of locking in today’s prices, whilst also ensuring your family isn’t left with this significant financial burden after you’re gone. Although there are some reputable providers working in the interests of consumers, the sector has rapidly expanded over the last few years, with our research revealing a worrying number of conduct issues and lack of consumer protection.
“The combination of a fast growing market fuelled by high pressure sales to a potentially vulnerable customer base is creating a perfect storm. A growing number of customers are likely to be let down when their plan is claimed on – with some funeral plan providers passing on significant extra costs to the families. And there is a concern that client money is not always being adequately looked after. Without intervention, we may yet see a Farepak-style collapse in this market, which leaves thousands of customers out of pocket.”
Simon Cox, Head of Insight and External Affairs, Dignity, commented;
“The sector is evolving into a two-tier market; those committed to offering quality products and services, versus those willing to “sell at all costs”, without strong governance or worry about fair customer outcomes.
“We believe a governance gap is responsible for an explosion of online and telesales organisations who have moved on from PPI and accident claims management into funeral plans. Our worry is that this situation is not sustainable, and before too long poor practice will result in one or two struggling to fulfil their obligations, leaving the rest of the sector to deal with the debris.”
Dignity and Fairer Finance are committed to working positively with consumers, government regulators and partners in the industry to explore these recommendations and encourage other plan providers to do the same. It is hoped that over the coming months, an improved consumer environment in the sector can become a reality.