Pre-paid funeral plan providers will be held to new high standards when they come under Financial Conduct Authority (FCA) regulation and supervision from Friday.
All authorised funeral plan providers will then need to follow new FCA rules, which include a ban on cold calling and commission paid to intermediaries.
The regulator has said it wants to see an improvement in the way customers are treated, with better value products, improvements to sales practices and better controls.
Funeral plan holders of authorised providers will be able to refer complaints about a firm to the Financial Ombudsman Service (FOS) and will be covered by the Financial Services Compensation Scheme (FSCS) if their provider goes out of business.
The FCA has said its new rules will provide continuity for customers where their plan provider fails, by allowing plans to be transferred to a new provider on the same terms as the original contract.
If your firm is in the pre-paid funeral plans sector, you should start thinking about what regulation will mean for you and what you need to do to prepare. Find out more https://t.co/CKh9FTyU8D
— Financial Conduct Authority (@TheFCA) March 2, 2021
The rules will also ensure consumers can receive compensation from their firm if a transfer to another provider is not possible.
Where a regulated provider fails and the FSCS is involved, the rules also allow the FSCS to arrange continuity of funeral contracts or pay cash compensation to customers as appropriate.
Firms will be required to ensure that plans are sold fairly, perform as expected and provide value for money.
Funeral instalment plan products which do not guarantee that a funeral will be delivered will be prevented.
Cold calling will also be banned, and new standards on advertising will be implemented to ensure plans are sold fairly.
High-pressure sales tactics such as cold calling can result in people taking out unsuitable products.
Commission payments to intermediaries will also be banned, to ensure products represent fair value.
Those selling funeral plans will be subject to full checks on their fitness to operate to improve governance standards and oversight.
We intend to authorise 24 firms when the pre-paid funeral plans industry comes under our regulation from 29 July https://t.co/fZ134ticHf
— Financial Conduct Authority (@TheFCA) June 17, 2022
Earlier this week, the FCA said it had issued a decision notice to One Life Funeral Planning Limited, refusing the firm’s application for authorisation.
It said One Life has until October 31 to transfer its customers to another provider or provide refunds. It is able to carry out funerals for existing plans during this time but cannot sell new funeral plans, the FCA said.
It added that One Life has the right to refer the decision to the Upper Tribunal.
The regulator has published a list of firms it intends to authorise at www.fca.org.uk/news/press-releases/fca-announces-funeral-plan-providers-likely-be-authorised.
An FCA spokesperson said: “Our regulation of pre-paid funeral plans willâ¯lead toâ¯higher standards in the market and boost consumer protection.
“We expect to see an improvement in the way customers are treated, with better value products, better sales practices and better controls in place so consumers can be confident they will receive the funeral they expect.”