I could write a whole essay about this topic. It is often difficult not to go off at a different tangent when discussing the numerous complexities of funeral plans and their infrastructure.
The CMA are investigating funeral pricing and practices. They are barely skimming the surface of the prepaid funerals which are, in long term, going to have the biggest impact on the funeral sector, in time.
1 in 3 people in the near future will have a funeral plan in place. The plans are in essence a financial package, dressed up to be a funeral and to tie a funeral director into his prices. They are a great thing for the client and the family. They are a great thing for the financial service that provides the plans financial side of things. They are not a great thing for family run independent funeral directors.
As an independent we pay annual fees to products like Golden Charter. Golden Charter have a lot of financial ‘clout’ and can set their prices and set the plans growth value to the funeral director when the product (funeral) is required. Funeral directors also pay a fee to Golden Charter when the plan is taken on and the family also pay an ‘admin’ fee to Golden Charter when the plan is taken on. Golden Charter is only one of many numerous plan providers that can designate independent funeral directors but as the longest established of them all, we reference them.
Often, these plans underpay the independent funeral director.
To combat the falling sales of funeral plans, products called ‘funeral benefits options’ have come into place which Golden Charter sells to the independent funeral director for an ‘admin’ fee of £200 as long as the funeral director guarantees to apply a £300 discount when the funeral is required. This is, more than half the time, a family that would have come to that funeral director anyway, so the FD is paying a premium of £500 so that he can obtain the future business that he likely would have had anyway. The people benefiting are the financial company and the family. Independent funeral director’s are paying a premium to guarantee future business. If we don’t accept the plan, A.N. Other funeral director will accept it. Golden Charter encourages us to sell the plan and add an amount, before showing the £300 discount. Hardly transparent pricing, in anyone’s language.
PREPAID PLANS FAILINGS
1: Sales Network:
The sales network for many prepaid plans are part of the issue, estate agents, financial advisors, solicitors and banks, all sell plans. They have little or no knowledge of the local costings, disbursements or the product(funeral) they are selling. They receive £50 or more commission for selling a plan, from the financial company, not the funeral director. The sales network often undersells, leaving the shortfall to be explained by the funeral director when the funeral is required, years later.
The Solution: Legislation that only the end provider of the funeral service can sell a plan for their services. This way there would be no miss-sold plans or incorrect costings and the family would deal with the person that would ultimately look after them. The person selling the plan would be a funeral director and have extensive knowledge of funerals and costings. You wouldn’t go to a TV store to buy a car, why go to anything but a funeral director to buy a funeral?
The plan growth cannot guarantee to meet the future cost of a funeral. This is because the funeral director does not control the cost of Dr fees or church/minister fees or crematoria/cemetery fees. Sefton Crematoria near Liverpool raised their prices 40% in 2011. This massively impacts on plans sold before 2011, they cant possibly have grown at the same rate. Once again the funeral director is left to explain the issue, the shortfall, and ask for the difference when the funeral is required.
The Solution: Funeral plans should be a purely financial package called funeral or death insurance and would be a contribution towards the funeral. Nobody can guarantee future prices. Possibly make it a completely separate product to the funeral director. You wouldn’t go to a car showroom and pay for a car you would need in ten years and expect to pay no more, ten years later.
3: Prices of funerals/crematoria
To prevent the above solutions being negated by funeral directors charging what they want, align them all with standardised pricing structures. This would mean more competitive pricing, transparent pricing and easy like for like price comparisons. This in turn would reduce massive price increases and in turn mean prepaid plans would be more likely to meet their cost instead of shortfalling. Introduce standardised national crematoria and cemetery charges to create the same situation and then there is more control over charges and costs and much less risk of the funeral insurance falling massively short. There is no real reason these things should increase at more than inflation.
Why Will They See The End of The Independent Funeral Director?
Large corporations own many hundreds of small funeral directors and run them as a large corporate machine. The UK’s two biggest are Co-Op and Dignity. They have their own in-house funeral plans and massive financial ‘clout’ to sell and saturate local areas with leaflets and coffee mornings promoting their prepaid plans. These plans indicate the client can choose their funeral director when in reality they cannot. They can choose a Co-Op or Dignity owned funeral director only. The long term conclusion of this is that ultimately a larger part of the funeral market will be services provided by the large corporates and in time will make it much less viable for an independent funeral director to make a living.
Often, plans sold by insurances such as Sun Axxa or Help The Aged are plans that are promotional plans run by the large corporates. The result being that clients are tied to a funeral director they didn’t ultimately want.
The Solution: Again, the best solution for this is to make it legislation for only the end service provider to sell the plan or in fact make funeral plans and funeral insurances completely separate to the funeral director. This will prevent the sales network being deceptive and concealing who the plans is really being sold by and who the funeral director can be. This will also ensure correct knowledge by the person selling the plan.