SAIF Golden Charter

A new regulatory landscape

The funeral profession has shown high standards of care during the COVID-19 crisis. Now it must prepare for a new Code of Practice, says FPA Chief Executive Graeme McAusland…

Recent events

Reflecting on the funeral profession’s national response to the COVID-19 pandemic, I’m humbled by its collective act of public service: caring for those who have died from, or with symptoms of, COVID-19, supporting bereaved families unable to hold traditional funeral services, and easing the burden placed on grieving families at the most difficult of times.

This ethos of public service has brought sector leaders together, it’s spurred solutions where problems lay, and it’s ensured that, through it all, the funeral profession continued to deliver a vital public service to communities in villages, towns, and cities across the UK, as it has done for generations.

As the UK moves past the peak of the outbreak, the emerging funeral market will look different from the one left behind. Communities are collectively mourning, and mortality is at the fore of public discussions, so it’s only natural that families will reflect on their own end of life arrangements and financial provisions more so than they may have otherwise.

A new regulatory landscape

Alongside a possible growth in funeral planning, the pre-paid market must also prepare for the new regulatory landscape. While statutory Financial Conduct Authority (FCA) regulation is on the horizon, currently expected by mid-2022, the Funeral Planning Authority’s (FPA) new Rules and Code of Practice are with us now, offering consumers, plan providers, funeral directors, and other third-party sellers the only form of voluntary regulation currently available.

I want to share with you the FPA’s rationale for introducing its new Code of Practice, and provide an overview of what the new Code means for plan providers and funeral directors alike.

The need for a new code

The rules that govern any society, organisation or profession, whether codified in constitutions, standing orders or codes of practice, work best when they are living organisms, evolving to meet emerging needs.

The deliberate, measured changes to the FPA Rules and Code of Practice, introduced in January, reflect the growing professionalisation of the funeral plan sector and its evolution towards a consumer-focused, statutory regulated industry.

Since joining the FPA in late 2014, I’ve seen improvements in complaints handling, sales practices, and the oversight of intermediaries; more firms are engaging constructively with the FPA, and improved access to information has enhanced the Authority’s ability to hold providers accountable. At the same time the world does not stand still and we have seen consumers embrace digital channels at pace, a growing desire for personalisation, and a maturing understanding of consumer vulnerabilities.

As consumer behaviour evolves and we deepen our understanding of their vulnerabilities, the pre-need market is evolving to meet consumer needs, and regulation needs to recognise this.

Vulnerable consumers

At the heart of the new FPA Code of Practice is a desire to enhance consumer protection, security, and certainty, particularly for vulnerable consumers.

A vulnerable consumer is a person who, due to their personal, financial or health circumstances, is especially susceptible to detriment, particularly when an organisation is not acting with appropriate levels of care. Under the new Code, the FPA requires all registered plan providers to develop, monitor, and deliver on a Vulnerable Customers policy.

This is more than a paper exercise: plan providers must train all employees, agents, and representatives, including their partnering funeral directors, in their vulnerable customer policy, and must ensure all employees, funeral directors, and third-party sellers adhere to that policy, throughout the sale and administration of funeral plans, through robust compliance oversight and, where necessary, enforcement.

While customers in the pre-need market are most often rational consumers, without limits on time and, often, with recent experience of arranging a funeral, it is important to remember that, alongside longer-term vulnerabilities arising for example from physical disability or protracted periods of poor mental health, we can all be vulnerable in certain contexts.

Many of us will experience vulnerability during difficult periods of our lives – for example, a period of financial hardship. Equally, customers looking to purchase a funeral plan immediately after a bereavement may still be grieving and it’s important that plan providers, funeral directors, and third-party sellers are able to recognise such vulnerabilities.

So a vulnerable consumer policy is required for the common good, protecting all of us in times of need. The FPA asks plan providers, funeral directors, and third-party sellers to wholly embrace the policy, both in ethos and in practice.

A funeral director agreement

The responsibility placed on the registered provider is at the heart of the new Code. When a plan provider and funeral director choose to work together, I expect both parties to contractually agree, in writing, the terms of that relationship. The FPA will, ultimately, hold plan providers responsible for the behaviours of funeral directors and third-party sellers – both in their actions and omissions – and for this reason, it is essential that both providers and their partners are clear on their roles and responsibilities to customers.

Consequently, plan providers must have procedures in place to ensure that funeral directors are operating in line with our Code and Rules. In practice, this means the FPA expects plan providers to carry out due diligence checks on firms’ ownership and financial stability before entering into new arrangements. It means that the FPA requires plan providers to develop systems of oversight that are robust enough to provide assurances on third party compliance. It also means that, where plan providers identify serious breaches, we at the FPA require plan providers to remediate matters, which may mean the termination of relationships, in the interest of consumers.

The new Code and Rules also bind plan providers with a duty to provide funeral directors with written guidance on sales practices, as well as specific training on vulnerable consumers. The FPA also requires plan providers to provide funeral directors with Key Features Documents, Payment Information Sheets, and Terms and Conditions, which funeral directors must, in turn, provide to potential customers as part of pre-contractual brochure packs.

Moreover, upon receiving consumer funds for a pre-paid funeral product, the Rules and Code make clear that it is the plan provider’s responsibility to transfer the funds, as soon as is practical, to either a Trust or a whole life insurance policy.

So you will see that, while plan providers are ultimately accountable, the new regulatory framework promotes a culture encouraging both plan providers and funeral directors to work together in the interest of consumers.

The years ahead

The tragedy of the COVID-19 pandemic is unprecedented in modern times, with the funeral profession a key element of our national response. As we emerge from that tragedy, the funeral profession has little time for reflection, with regulatory change on the horizon, both at-need and pre-need, from the ongoing CMA investigation and the Government’s statutory funeral plan proposals respectively.

While adapting to new operating environments is often challenging for small and micro-businesses, those who acclimatise now to the new FPA Code and Rules will not only evidence their commitment to the highest of consumer standards today, they will be more ready to adapt to the anticipated world of statutory FCA regulation.

Finally, as a committed regulator, I ask readers to remember this: good regulation gives consumers the protection and security to purchase with confidence; consequently, good regulation is also good for those businesses that do the right thing. Keep this in mind, and know that there are brighter days ahead for the funeral profession.