From 29 July, any provider of funeral plans must be authorised and regulated by the Financial Conduct Authority (FCA), as reported by the BBC.
The move ought to give consumers far greater protection than they have at present. Earlier this year, the ironically named Safe Hands was one of the companies operating in the unregulated sector.
The company went into administration back in March, leaving its existing customers worried about the money they’d paid upfront, in some cases several thousand pounds.
Not in a position to refund
The administrators have said they will carry out a detailed investigation into what can be returned to creditors, including Safe Hands policy holders. But the administration means that the company isn’t currently in a position to issue refunds.
The FCA’s proposals for regulation of the industry include a ban on cold calling. It said it was reforming the sector because far too often elderly and vulnerable customers had been subjected to high pressure sales and cold calls.
The UK’s funeral plan sector has some 1.6 million customers, with 200,000 funeral plans taken out every year. The average plan costs £4,000 and lasts for eight years.
Risk of companies going out of business
At present, there are approximately 65 companies operating in the sector. Industry insiders are worried that the reform of the funeral plan market will result in some of those providers going out of business and leaving their customers in the lurch.
Many of the larger, more reputable firms are expected to be granted authorisation by the FCA, but there are others that are unlikely to even apply for authorisation or will be turned down. If that happens, those companies will be unable or not allowed to operate beyond 29 July.
Customers who have signed up to plans very recently can cancel during the cooling-off period, but others will have to wait to see what their company does, which might mean them losing their money.
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