Co-op’s Funeralcare and Life Planning business has responded to HM Treasury’s call for evidence on the pre-need funeral market, reiterating its calls for urgent FCA regulation of the sector.
Co-op has said the current voluntary model of regulation for funeral plans is not sufficient to meet the needs of a fast growing market.
The company has advised the government body that there is a pressing need in the funeral plan market for increased transparency and a ban on aggressive sales. It has also explained that the FCA is the only body which has the expertise, consumer recognition and resources to provide this important protection to consumers.
According to the national funeral provider, the new regulatory framework should address the areas where the current funeral plan market does not adequately protect the interests of consumers including transparency, sales practices, security of the client’s money and better public understanding of the Funeral Planning Authority.
The funeral provider said that the recent increase in demand for funeral plans had resulted in a boom of new funeral plan providers who entered the market purely for profit.
Co-op’s response to HM Treasury follows its recent submission into to the CMA on the scope of its review of the funeral market which focused on four key areas:
- The need for greater transparency for clients so they understand the quality and standards of care they can expect when purchasing a funeral for their loved one
- The role regulation could play in achieving minimum standards of care across the industry
- Extending the scope of the CMA review to consider how funeral directors compete for the redemption of funeral plans
- The market power exercised by crematoria and the impact of this on the fees charged
Matt Howells, MD for Co-op Life Planning said: “When sold fairly and responsibly, funeral plans are an important means for consumers to ensure that future funeral costs can be met without placing financial stress on bereaved families or requiring recourse to public funds.
“However, by buying a funeral plan, consumers are entrusting their funeral plan provider with a significant sum of money for a period of potentially many years. In many cases, those buying funeral plans (many of whom are potentially vulnerable consumers) will not appreciate that their funeral plan may not cover the full cost of a funeral. We believe that some of these providers are engaging in sales practices and investment strategies which are focussed on short-term financial profit to the detriment of consumers.”
He added: “Given that many of these new plan providers have only been established for a short period of time and the average time between purchase and redemption of a plan is approximately seven years, the investment strategy, commission levels and business model of these providers remains unproven, particularly if placed under financial strain.
“FCA of funeral plan providers is the most appropriate route to provide consumers with the protection that they should be entitled to expect when entrusting others with their money.”