Report finds shortfalls in prepaid funeral plans and families facing unexpected bills after death of a loved one.
New research highlights mis-selling of funeral products, poor practise and families being forced to pick up the bill when prepaid funeral plans don't meet their needs.
Fairer Finance, the consumer finance campaigning group, has found that families are still facing significant bills even after a deceased loved one had purchased a prepaid funeral on the understanding that all costs were included.
The key selling point of prepaid funeral products is security and having peace of mind that when the time comes your family won’t be hit with a big bill - while at the same time you have confidence that you'll get the send off you want. Simple, right? Payment up front, all the arrangements made in advance, leaving you to live your life safe in the knowledge that when the comes everything is covered. Well, that’s the theory.
More than 200,000 prepaid funeral plans are sold each year in the UK and the market is expanding as the baby boomer generation ages. For the customer, it’s an investment to cover the cost of their future funeral. You buy your plan locked at today’s prices, which, with inflation in the funeral sector running well above CPI and RPI, makes prepaid plans a very attractive investment.
The plans generally cover the cost of the funeral director – which in most cases is the largest expense of arranging a funeral. Some products include a 'disbursements' contribution but do not clearly state that these are fluctuating third-party costs are beyond the control of the funeral director and vary greatly from region to region. For example, the cost of burial in London is approximately £3800 while cost in the North West is around £1600.*
This lack of clarity leads many consumers to buy under the mistaken belief that there will be nothing more for their family to pay.
There is also a lack of consumer protection in the funerals market. For the purchaser, a funeral plan is a significant financial investment with similar attributes to insurance products, yet worryingly these products remain unregulated by the FCA. While some providers have signed up to voluntary oversight by the Funeral Planning Authority (FPA), this organisation has no legal authority and is little more than a code of practice.
Without proper regulation, there is a serious risk that the customer investment - the money you paid for the funeral plan - is not adequately looked after by unscrupulous sellers and could result in families across the UK facing bills of thousands.
Here are some of the key points of the research:
Lack of clarity
Product limitations are rarely made clear. The cost of a funeral often exceeds the cover offered by these plans, but few providers are forthcoming about this point. There can be additional costs for customers who move home, but these are rarely disclosed clearly and cancellation fees are very high.
Mismatch of customer expectations
The research demonstrated that consumers tend not to understand what is and isn’t covered by their plan. Customers buying these plans are often elderly and more vulnerable. Crucially, they are not around to check whether the product met their expectations when a claim is made.
One disturbing observation of the research is the increased use of high-pressure sales techniques. As many as six million people over the age of 50 are estimated to have been marketed to by funeral plan companies – with a subset of this group subject to aggressive telephone marketing or in-home visits. At their worst, some of the intermediaries in the market have employed “Boiler Room” sales tactics. Sales operatives – especially third party intermediaries – were often loose with the facts around the safety of client money.
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. Few providers reveal how much money they take from the funds. Some models present a considerable risk that consumers could be left out of pocket in the event that a provider were to go bust.
Lack of consumer protection
The industry is subject only to voluntary regulation by a body that until recently was governed by executives from all the major providers. Some providers are not part of this voluntary regulation scheme. Third party sales firms are not even directly subject to voluntary regulation. Consumers do not have access to an Ombudsman service in the event that their complaints are not resolved satisfactorily.
Read the full report
2017 Cremation and Burial Cost Index - Funeralbookers*