The government launched a call for evidence on the regulation of pre-paid funeral plans in June 2018 which found that the market is not operating as it should. The government found evidence of harm to consumers and found that there is broad support among funeral plan providers for the voluntary system of regulation to be replaced by a compulsory regulatory regime for the sector.

Under the previous government we committed to ensuring that customers of pre-paid funeral plans are properly protected and consulted on a new legislative framework to bring the pre-paid funeral plan market within the remit of the Financial Conduct Authority. The consultation closed on 25 August and a response to the consultation will be published in due course.

HM Treasury launched a call for evidence on the regulation of pre-paid funeral plans in June 2018. The call for evidence confirmed that consumer detriment is present in the pre-paid funeral plan sector and that there is broad demand for the sector to come under compulsory regulation.

Consequently, the government intends to bring the pre-paid funeral plan market within the remit of the Financial Conduct Authority and has consulted on the proposed legislative framework to implement this proposal. The consultation closed on 25 August and the government is currently reviewing the responses. A response to the consultation will be published in due course.

The information requested is not collated centrally and could only be provided at disproportionate cost.

In June 2018, the CMA launched a market study into the funeral sector. The CMA investigated two core areas in connection to the supply of a funeral: (1) how competition between funeral directors works and transparency issues in the provision of funerals; and (2) how competition works in the crematoria segment of the industry. In light of the findings of the market study, the CMA launched a full market investigation into the funeral sector. The scope of the CMA’s market investigation includes the funeral services supplied by funeral directors arising from the redemption of funeral plans.

HM Treasury launched a call for evidence on the regulation of pre-paid funeral plans in June 2018. The call for evidence has confirmed that consumer detriment is present in the pre-paid funeral plan sector and that there is broad demand for the sector to come under compulsory regulation. Consequently, the government intends to bring the pre-paid funeral plan market within the remit of the Financial Conduct Authority and is currently consulting on the proposed legislative framework to implement this proposal.

My officials have engaged with the CMA to ensure the respective investigations are complementary and coherent.

Funeral expenses insurance is a commercial product and the Government does not believe it would be appropriate to interfere in the market in the way the Honourable Member for Glasgow South describes. The respective capabilities of insurers to assess risk is a key element on which they compete and helps to ensure there is a diversity of products and efficient pricing in the market.

Insurance is a risk transfer mechanism. At a basic level insurers group together large numbers of people, who all face a similar risk, and collect money from each of them through premiums. This pooling principle lies behind funeral cover insurance policies. These protect policyholders from the risk of dying early and not having accumulated the level of savings they would wish to leave behind to cover the costs of their funeral. The premiums of those who live long enough to contribute more than they would receive in benefits from the policy are used to pay the shortfall from those who die earlier.

Therefore it is possible for those with funeral cover insurance to pay more in premiums than they will receive in benefits. An alternative option to such insurance would be to save this money which would mean an individual would not receive less than they put in. However they would then face the risk that, should they die earlier than expected, they would not have accumulated as much in savings as they would have received in benefits from an insurance policy.

It is important that consumers understand the nature of their funeral cover insurance policies. The Financial Conduct Authority (FCA), which regulates the insurance industry, has produced an Insurance Conduct of Business Sourcebook (ICOBS) in order to set the standards required of insurance firms in relation to their business. ICOBS rules include a requirement that customers are given all the appropriate information required to make an informed decision ahead of purchasing an insurance product. The rules also state that communications should be clear, fair and not misleading. This means that where there is a possibility that a funeral plan may pay out less than was paid in, this must be clearly disclosed to the consumer before they purchase the product.