The Financial Conduct Authority (FCA) had laid out its plans to regulate the pre-paid funeral plans sector.
A new consultation, which is open for feedback until next month, describes the draft rules for regulating the sector and improving its standards.
The consultation follows the drafting of legislation at the start of the year, designed to bring the sale and administration of funeral plans under the scope of the FCA’s regulation.
This new legislation followed concerns raised in the press and by consumer groups about how some pre-paid funeral plan providers were conducting themselves, as well as their financial strength.
The new rules come into force from July 2022.
Within the consultation, the FCA explained it will improve standards in the pre-paid funeral plans sector by ensuring that products meet the individual needs of consumers. They will ban the sale of products that do not provide for funeral services in almost all circumstances when someone dies.
The new regulation will also ensure that plans are sold fairly, including a ban on cold-calling to prevent consumers from being hassled into taking out plans which might not be suitable.
Pre-paid funeral plans will need to be fairly valued, which will stop firms from using additional fees to drive up their profits. It will also result in a ban on the payment of commission to intermediaries.
Finally, the FCA will ensure that those who buy these plans have access to the Financial Services Compensation Scheme (FSCS) and Financial Ombudsman Service (FOS), should things go wrong.
Sheldon Mills, Executive Director of Consumers and Competition, said:
“Pre-paid funeral plans can help people and their families to manage the costs of a funeral. It is vital that consumers have confidence that their plan will deliver the funeral they expect at a fair value.
“The measures proposed today will help ensure that the industry serves consumers well.
“It’s imperative the industry prepares now, ahead of its upcoming entry into financial services regulation.”
To prepare for the changes, firms will need to consider how the FCA regulation impacts their business and start making necessary changes, as required.
Firms will need to apply to the FCA for authorisation, a process that starts in September 2021.
The information contained in this blog post does not constitute advice or recommendations. You should seek independent financial advice before acting on any information on this website.