Fairer Finance Review of the Funeral Plan Market

Dignity recently commissioned extensive research into the funeral plans market as it had become clear that the scale of unscrupulous sales practices from an increasing number of entrants to the market was significant, and growing.

Although commissioned by Dignity, the research was carried out by an independent research company and was reviewed, verified and published by consumer group Fairer Finance.

The published report highlighted that there are indeed significant differences in the quality of plans being offered and also how they are being sold to consumers. Dignity has always been committed to providing the highest standards in both our plans and communications and we welcome any move to improve consumer understanding and protection across the entire funeral plan market.

There were 4 key points raised by the report.

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.

Dignity do not offer the contribution style plans highlighted in the report as our plans provide guaranteed cremation services and funeral director services as detailed within our plan documents.

We do provide a contribution if you wish to have a burial, as we can’t guarantee the cost of the plot due to such significant variations in price throughout the UK, but we are thoroughly clear throughout our marketing that this is the case. Dignity are constantly making strides throughout our digital and marketing communications to ensure consumers are completely clear of what is included in our plans and what is not covered.

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'.

There are a large number of unregulated companies that sell Funeral plans on behalf of some providers. With no regulation or governance these companies are often able to employ unacceptable sales tactics. Dignity work with carefully selected partners, who in the most part are leading consumer brands and often FCA regulated businesses.

Our sales processes are carefully governed and monitored and we would never push anyone to make a purchase that they are not 100% committed to. Our investment in fair and professional client service is evidenced by Dignity being award the first ever BSI Kitemark for Customer Service in 2017.

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.

Dignity guarantee your money is held securely. When you pay for your Prepaid Funeral Plan, your money is placed in the independent National Funeral Trust where it is held until it is needed. Dignity are one of very few providers who publish an annual report on the performance of the Trust Fund, which provides complete transparency of the funds ability to cover its funeral plan liabilities.

Lack of consumer protection

The industry is subject to voluntary regulation by the Funeral 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.

Dignity is a member of the Funeral Planning Authority, and welcomes much further regulation in the sector. We advocate that consumers should only purchase a plan from a registered member of the Funeral Planning Authority.

Dignity's View of the Funeral Plan Market

Simon Cox, Head of Insight & External Affairs

A funeral plan is, in most cases, the most effective way to plan and pay for a funeral.

However, the stark reality is that without a step change in both providers’ sales practices and regulatory enforcement, a very important market is in real danger of bringing itself into disrepute and working poorly for consumers.

Head of Insight & External Affairs, Simon Cox explains further:

"By commissioning Fairer Finance to review our research, and the market, with clear recommendations as to how outcomes can be improved for consumers, we hope we can demonstrate our commitment to improving standards across the whole funeral sector. The findings of this report make clear there is significant variation in quality and standards across the funeral plan sector, both in relation to the quality of the products being sold (notably what they include), and the sales and marketing practices used to sell them. It is clear that some providers are selling quality products in an appropriate manner, whereas others are not adopting these same standards.

"Funeral Plans are complex in terms of what the product consists of, the risks that are present, and the language and terminology used. The research demonstrated that customers do not understand these risks, and as a sector we need to improve this position through the introduction of appropriate risk warnings, and greater communication around financial shortfalls. Dignity has invited Fairer Finance to work with us to help improve how we communicate with customers and to improve clarity and transparency in areas where this is needed.

"A funeral plan looks and feels like a financial services product, has 1.2 million plan holders (more if you include those operating outside of the self-regulatory regime) and has funds under management of £2bn+, yet it is not regulated like a financial services product. What is more alarming is the vast majority (75%) of surveyed plan holders think that it is regulated.

"As a supportive member of the Funeral Planning Authority (FPA), Dignity is committed to improving standards and quality across the whole sector. The funeral planning market is an example of where a strengthened system of regulation would be beneficial for both the sector and consumers, something Dignity would welcome.

"We see the benefits of strong regulation across the many partner organisations we work with who are regulated by the Financial Conduct Authority (FCA), and who demand the same stringent standards regardless of whether a product falls outside FCA regulation.

"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.

"We recognise the FPA is limited by both resource and remit to more actively police the sector, but has nevertheless made improvements in terms of re-constituting its supervisory board so it is genuinely independent of the plan providers. We also understand that the FPA have made the FCA aware of poor practice in the sector, but that this has not always been acted upon. As Fairer Finance recommend, a body with sufficient resource, infrastructure and statutory powers to pro-actively monitor and robustly regulate the sector is essential to improve standards and protect consumers from poor practice. We are less concerned about whether regulation is forthcoming through the FCA or a significantly empowered FPA.

"In particular Dignity would advocate the following approach:

1. The funeral plan regulator should have (statutory) powers to police and enforce good practice
2. All plan providers should be compelled to obtain a license to trade via the regulator
3. Sector-wide acceptance of Treating Customers Fairly (TCF) principles and financial promotion rules, with the aim of delivering the six customer outcomes which the FCA expects TCF to achieve
4. Clear declaration of ties and affiliation rather than sites that purport to be comparison sites
5. greater oversight from the information commissioners office to eliminate breaches of data protection and privacy and electronic communications regulations

"This report sets out evidence that everybody with an interest in the market should take note of. Dignity looks forward to working with the rest of the industry, regulators, government and consumer bodies to understand how these recommendations can be taken forward."