Co-op urges Government to act now and protect vulnerable consumers through FCA regulation of funeral plans

26 April 2018

Calls for increased transparency, enhanced financial protection and a ban on aggressive sales
UK’s leading plan provider welcomes Fairer Finance report looking at pathways to regulation

Co-op Funeralcare is calling for urgent reform of the funeral planning market in order to provide greater financial protection for the 200,000 consumers who now invest in these products annually.

The UK’s leading funeral provider has written to Treasury, the FCA and other key consumer and financial organisations highlighting that the current voluntary model of regulation for funeral plans is not sufficient to meet growing customer needs. It is calling upon Treasury to consult on statutory regulation.

Co-op is asking the Government to act now to protect vulnerable customers by fully assessing a future model for regulation under the FCA. This it believes is the most effective route to drive up standards, eradicate poor sales practices and increase financial protection for funeral plans. FCA regulation it claims would also stamp out poor practice by introducing appropriate sanctions for those firms who fail to meet these standards.

Co-op’s calls come as consumer group Fairer Finance releases its second report into the funeral plan sector, entitled “Towards regulation of the prepaid funeral planning market.” Co-op is the only plan provider to call for FCA regulation within the report.

Over the last five years the funeral planning market has grown rapidly by more than 50 per cent and 1.3 million plans are already in place across the UK. In 2017 alone over 200,000 funeral plans were taken out with almost 90,000 families using a plan to help meet average funeral costs of approximately £3900.

The Co-op is warning that the practices adopted by a minority of providers in this growing market has left consumers exposed to poor sales practices. It is also concerned about the limited financial protection on offer with some plans. It has told Government that this poses a future financial risk to consumers, particularly vulnerable or older clients, who are being encouraged to take out products that lack transparency and don’t provide appropriate financial cover for eventual funeral costs.

Recognising that a consultation on regulation is not an immediate fix, in the interim the Co-op is calling upon all plan providers and those marketing plans to take positive steps to drive up standards by meeting the following minimum standards:

Commission – A commitment from plan providers to be fully transparent on any commission taken out of plans either for their own staff or for business introducers / sellers
Investment transparency – Providers should publish full details as to where client money is invested and how much they have reserved against each plan
Comparison sites – A ban on all sites claiming to be independent and misleading customers about selling plans from all providers
Sales practices – A ban on outbound commission driven leads based telesales activity

Matt Howells, MD for Co-op’s life planning business said:

“We’re focused on driving greater transparency for customers in the funeral planning market and welcome today’s report from Fairer Finance.

“Due to the comprehensive nature of our plans, over 69,000 families purchased a plan in 2017 and a further 20,000 families benefit financially on average each year from their loved one having put in place a plan with Co-op Funeralcare. Independent personal finance experts have also recognised our plans as amongst the best on the market.

“Sadly not all plan providers offer this financial protection. Today’s report highlights that the sales practices of a minority of providers are putting thousands of vulnerable consumers at risk financially. We believe this needs to be urgently dealt with, and we are supportive of statutory regulation under the FCA as the most comprehensive route for this being achieved.

“We recognise that statutory regulation will take time, and are engaging with the FPA and its other members regarding measures to improve the market in the interim.”

About Co-op’s Plans

Co-op were recognised in the Fairer Finance report for having removed staff sales incentives on plans, for publishing details regarding the health of funeral plan funds and for offering enhanced cover and financial protection for clients under the Financial Services Compensation Scheme.

Its plans have been recognised by independent consumer groups Fairer Finance and Moneynet as amongst the most comprehensive on the market, with Co-op becoming the only plan provider to receive the Fairer Finance Clear and Simple Mark. Earlier in the year Co-op became the only UK plan provider to launch an additional commitment with increased financial protection for customers paying monthly for their funeral plan.

Ends

NOTES TO EDITORS

Media Contacts:

Lauren Pogson
Senior PR Manager
Email: Lauren.Pogson@coop.co.uk
Mobile: 07702 505626

Alexandra Wilson
PR Manager
Email: Alexandra.wilson1@coop.co.uk
Mobile: 07450641368

About Co-op:

The Co-op, one of the world’s largest consumer co-operatives, with interests across food, funerals, insurance, electrical and legal services, has a clear purpose of championing a better way of doing business for you and your communities. Owned by millions of UK consumers, The Co-op operates a total of 3,750 outlets, with more than 70,000 colleagues and an annual turnover of approximately £10 billion.

About Co-op Funeralcare:

Co-op Funeralcare conducts almost 100,000 funerals annually across over 1,000 funeral homes. Combined with its leading legal services business, the Co-op is also a national provider of later life products and services ranging from funeral plans, through to wills and probate.