1 June 2018
A win for Fairer Finance's funeral plan campaign
It will be two years this month since my mother died and I first took an interest in the funeral sector.
Back then, I was mystified how funeral companies could charge my family £2,000 for a basic funeral package - but twice that for a package that included a slightly nicer coffin and some extra flexibility on timings.
As I dug a little deeper, it was clear that many funeral directors were making very significant margins - taking advantage of consumers at a time when they were at their most vulnerable.
It was also evident that competition was not working very effectively in this market. Behind closed doors, senior executives in the largest firms were willing to admit as much.
Blowing open the problems in the pre-paid market
A year later, Fairer Finance was approached by Dignity to look at the pre-paid funeral planning sector. This was a market that was experiencing exponential growth but which, surprisingly, had no statutory regulation.
Our study uncovered a minority of providers exploiting customers, making promises they couldn't keep, while not taking adequate care of the significant sums that customers were handing over to pay for their funerals.
Crucially, these customers were not going to be around to find out whether their funeral plan matched up to their expectations.
When we published our first report last July, we called for urgent regulation of the prepaid funeral plan sector - warning that it looked like another Farepak waiting to happen.
Some months later, we assembled all the key players in the market to attend a roundtable and discuss solutions to the problem. And all providers unanimously supported statutory regulation of the sector.
We met with the Treasury numerous times to raise our concerns - and they listened intently.
The road to regulation
Then, at the start of this year, we embarked on a second research report - sponsored by Co-op, Dignity, Golden Charter and Ecclesiastical - to explore what the route to statutory regulation might look like.
Although much of the industry preferred the idea of the voluntary regulator being given statutory powers, we could see this was impractical. The FCA was an obvious home for this market - and we didn't believe that FCA regulation would have an overly harmful impact on competition.
Today - just 11 months after the start of our campaign - the Treasury started the process of introducing statutory regulation - a great victory for consumers, but also for our campaign.
I've rarely seen a consumer campaign achieve a positive outcome as quickly and as effectively as this one. And I want to personally thank John Glen for taking this issue seriously and acting quickly to fix it.
But Dignity must also take credit for being brave enough to sponsor the initial report to blow open the problems in the pre-paid funeral market.
Dignity has not had an easy year. It's share price is down 50% since last autumn - as it has finally started to tell the story to its shareholders about the failures in its markets. That includes the fact that margins have been inflated in the funeral sector for the past few years, and an admission that price competition is going to intensify.
CMA funeral study
Although Dignity's profit warnings may have been painful for the company, they will feel vindicated by today's second piece of government news - the launch of a Competition and Markets Authority study into the at-need funeral market.
The competition problems in the at-need market have to some degree been the cause of the issues in the pre-paid market. With such big margins to play with, pre-paid companies saw the opportunity to enter the market and take large commissions and fees whilst still providing a funeral by buying cheap in the wholesale market.
So these two issues did need to be looked at simultaneously, and I sincerely hope that the CMA study concludes with some material remedies to address the problems in the at-need market.
As far as we're concerned, today's announcements are a leap forward, but they are still only the beginning of a process. We hope that the players who are not acting responsibly in both the at-need and prepaid funeral plan markets - will either start the work of cleaning themselves up, or will exit the market.
Either way, we'll be working with the CMA, Treasury and FCA to ensure that we end up with a fair and proportionate regulatory framework - both for the funeral planning sector, and the at-need funeral market.