Funeral Plan Research – How Big Is The Teacup

Below is an article produced by Dignity Funeral Plans commenting on a report they paid for from Fairer Finance.

Our comments: the report itself is actually not too bad, but Dignity has overhyped it to follow their own agenda.   One interesting fact it unearthed is that Dignity Funeral Plans no longer cover doctors fees for cremation.  So their Guarantee is that you WILL have more to pay to be cremated unless you live in Scotland or the Law changes in the rest of the UK.

It also fails to point out that Dignities many crematoria charge around 50% more than the average, thus disadvantaging other providers some of whose third-party allowances are not enough even to pay the fee at a Dignity crematorium!

FCA regulation, with its predecessors, managed to reduce the availability of person to person financial advice by more than 90%, and decimated the number of genuine independent financial advisers.   Whilst we agree there are cowboys selling the plans, and some of the literature could be a great deal clearer, on past record, FCA regulation would be a disaster for all but Dignity and the Coop who either have direct sales forces or tied agents, mostly very big – Dignity cancelled our agency because we couldn’t promise to sell 1,000 of their plans every year!  Independent Advice, such as ours, would be priced out of the market by heavy-handed regulation.

On to the PR, there is a link to the actual report at the bottom.

Funeral Plans Research: Lack of regulation leaves millions of consumers at risk

Unregulated funeral plan market leaves millions of pounds of consumer money at risk

  • Report says perfect storm is brewing of misleading sales practices, lack of consumer understanding and lack of regulation in funeral sector
  • Up to 6 million people over the age of 50 have been contacted; around a third of those contacted felt they were pushed to take out a plan
  • Lack of transparency and compensation scheme means millions of pounds of consumer money could be at risk
  • Report calls for statutory regulation of the funeral plan sector

Independent consumer group, Fairer Finance, in partnership with Dignity Funerals, has published a report calling for stronger regulation of the funeral planning industry. 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 that:

  • 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.

Click here to download the full report

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