7 July 2017
Unregulated funeral plan market leaves millions of pounds of consumer money at risk
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:
• 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.
Notes to Editors
For media enquiries about this report please contact: firstname.lastname@example.org or call 020 3026 8541.
Further details on the report
The primary objective of the report is to investigate whether the market is working well for the sector.
Dignity commissioned Matter Communications to investigate sales practices in the funeral plan marketplace, and levels of customer understanding both before and after purchase of a funeral plan.
Matter is an independent research company and they investigated the number of customers engaged by prepaid funeral plan providers, and consumer opinion of the communications received.
Fairer Finance was commissioned by Dignity Funeral Plans to compile the report as a response to Matter Communication’s research findings. Fairer Finance is an independent consumer group campaigning for change in the financial services sector.
Although Dignity paid for this research, Fairer Finance retained editorial independence, including a right to criticise any bad practice by Dignity. Dignity was not granted editorial approval.
For further information on Matter Communications and Fairer Finance please see the ‘About this research’ section of the full report.
Dignity is a British company that has funeral homes and crematoria in towns and cities across the UK. The business also has a strong market presence in pre-arranged funeral plans, where people plan and pay for their funeral in advance.
Dignity Funeral Directors operate at the high end of the funeral market and provide excellent client service and facilities to care for the deceased. Dignity is the first company in the UK to be awarded the BSI Kitemark for Customer Service for its funeral planning business. The Dignity Diamond funeral plan was recently awarded a five star defaqto rating.
84% per cent of families chose Dignity because of reputation, recommendation, previous experience or through use of Dignity Funeral Plans. 98.8% of respondents to Dignity’s client survey say that the company met or exceeded their expectations.
About Fairer Finance
Fairer Finance is a consumer group with a mission to create a financial services market that works well for customers, as well as the businesses that serve them.
It does this by campaigning, publishing its unique ratings and research and by working with businesses to help them deliver a better experience for consumers. Follow Fairer Finance on Twitter @fairerfinance.