Are you at risk from funeral plan rip offs?
Some companies selling unregulated funeral plans are putting people under huge pressure to buy policies that won't cover the cost of the funeral. It means millions of people are at risk of being ripped off when they buy a funeral plan.
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A report by Dignity Funerals and Fairer Finance found that the funeral plan industry is booming, and in the past ten years the number of policies sold has increased five-fold. As a result around 1.2 million people have a pre-paid funeral plan. They can be a lifeline: the right plans, sold fairly, can be a great way to lock in today's funeral prices, and protect your family from huge and unexpected bills when you pass away,
The trouble is, as Simon Cox, Head of Insight and External Affairs, Dignity, puts it: "The sector is evolving into a two-tier market; those committed to offering quality products and services, versus those willing to "sell at all costs", without strong governance or worry about fair customer outcomes."
The report found that the less reputable companies are responsible for much of the growth of sales. Some 6 million people have been contacted by a funeral plan provider - or their agent - and been put under pressure to buy. Almost half of them were called two or more times, and pushed to buy a plan - some 63% of them said that repeated calls were not useful.
The plans aren't always explained clearly by these salespeople, so people are confused about what is and isn't covered. Over 90% of those identified as contribution style funeral plan holders wrongly thought their plan guarantees to pay for cremation costs when this was not the case. So while they think they are sparing their family the pain of unexpected bills after their death - they are leaving a more complicated headache.
The study also found there was 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. There is no safety net if a provider was to become insolvent.
The industry is subject to voluntary regulation by the Financial Planning Authority. Some providers are not part of this voluntary regulation scheme. Third party sales firms are not even subject to voluntary regulation.
James Daley, Managing Director and Founder, Fairer Finance, said: "The combination of a fast growing market fuelled by high pressure sales to a potentially vulnerable customer base is creating a perfect storm. A growing number of customers are likely to be let down when their plan is claimed on – with some funeral plan providers passing on significant extra costs to the families. And there is a concern that client money is not always being adequately looked after. Without intervention, we may yet see a Farepak-style collapse in this market, which leaves thousands of customers out of pocket."
Cox adds: "We believe a governance gap is responsible for an explosion of online and telesales organisations who have moved on from PPI and accident claims management into funeral plans. Our worry is that this situation is not sustainable, and before too long poor practice will result in one or two struggling to fulfil their obligations, leaving the rest of the sector to deal with the debris."