Funeral Plan Providers and Intermediaries came under regulatory oversight by the Financial Conduct Authority (“FCA”) on 29 July 2022. The goal of the FCA in regulating this sector was to bring with it higher standards and to boost consumer protection. In addition, customers of authorised funeral plan providers have access to the Financial Services Compensation Scheme (“FSCS”), so their money will be protected if their provider fails, as well as being able to make a complaint to the Financial Ombudsman Service (“FOS”).
In accordance with the FCA, there are two categories under Funeral Plans which require authorisation by the FCA:
- Funeral Plan Providers which are firms that enter into and administer funeral plan contracts and need to apply for the activities/permissions of:
- ‘entering into funeral plan contracts’
- ‘carrying out funeral plan contracts’ – this is when firms administer funeral plan contracts, whether these were entered into before or after our regulation started’
- Funeral Plan Intermediaries which are firms that sell funeral plans to customers on behalf of providers. This includes funeral directors, will-writers and operators of lead-generation websites. These intermediary firms generally advise customers on funeral plan contracts or arrange them for customers. The relevant activities/permissions are:
- advising
- arranging (bringing about)
- dealing as an agent
- making arrangements
FCA Authorisation
Obtaining the FCA authorisation as a Funeral Plan Provider or Intermediary ensures that the firm adheres to rigorous standards of governance, financial resilience and customer care. This is crucial as it builds consumer trust and enhances the credibility of the business.
Key Requirements for FCA Authorisation:
- Governance and Financial Resilience: Providers must demonstrate robust governance structures and financial stability. This includes having adequate capital and risk management networks in place.
- Consumer Protection: Funeral plan providers must prioritise fair treatment of customers, especially those in vulnerable situations, by ensuring clear and effective communication, transparent pricing and making sure that the products offered meet the needs of their target consumers.
- Operational Resilience: The firms must implement and maintain adequate systems and controls to manage operational risks effectively, as well as have in place disaster recovery plans and cybersecurity measures.
- Bans and Prohibition: Firms must ensure that no cold calling and commission payments to intermediaries take place, as the FCA has banned these activities to prevent aggressive sales techniques and arising conflicts of interest.
Intermediaries and Appointed Representatives
Funeral Plan Providers can appoint intermediaries to sell their plans. These intermediaries must either be directly authorised by the FCA or become Appointed Representatives (“ARs”) of the firm. The Funeral Plan Provider will act as a Principal firm of the AR, ensuring that it complies with the FCA regulations and maintains high standards of conduct.
Becoming an AR of a Funeral Plan Provider involves entering into a contract with an authorised principal firm. The arrangement will allow the AR to carry out regulated activities under the supervision of the principal firm. The Principal firm will ensure that the AR meets the regulatory requirements and complies with the FCA rules.
Embracing the Consumer Duty
The Funeral Plan sector has undergone a significant transformation following the introduction of the FCA’s Consumer Duty. The new requirements have the purpose of enhancing consumer protection and ensuring that Funeral Plan providers deliver fair value and treatment from the products and services their consumers purchase, as well as providing robust support.
This introduction of the Consumer Duty brought numerous benefits to consumers in the Funeral Plan sector, by providing them with access to FSCS and FOS giving them enhanced protection and a safety net with their product choices. Additionally, with clear intentions and oversight, consumers trust that their funeral plan provider will deliver as promised, giving them peace of mind during difficult times. The requirements of Consumer Duty allow consumers to make informed decisions that best suit their needs by helping them understand the products they are purchasing.
Some important considerations that firms have to take into account when it comes to Consumer Duty are:
- Fair Value and Pricing: Funeral Plan Providers and Intermediaries must offer fair value to their consumers, ensuring the price reflects the services and benefits provided.
- Clear Communication: Firms must give clear, accurate and understandable information to consumers at all stages, from initial contact to the delivery of the chosen funeral plan.
- Customer Support: Adequate support must be provided to all consumers, making sure they receive the services they expect and require.
Furthermore, all the firm’s staff must be trained to understand and implement Consumer Duty in their daily engagements, fostering a culture that prioritises consumer outcomes and ensures that providers meet the FCA’s Consumer Duty requirements.
Conclusion
Getting authorised and understanding the regulatory requirements of Funeral Plan Providers and Intermediaries is essential in ensuring the smooth navigation of the regulatory landscape, as well as building trust within the wider sector. This alignment ensures compliance and positions firms to capitalise on the opportunities within the UK’s financial markets.
How Can Complyport Help?
As experienced and leading Authorisation Consultants, Complyport can assist you in identifying the right regulated activities based on your Funeral Plan business model. Upon identification of the regulated services, we can help you navigate the complex application requirements and guide you in the preparation of the required policies and procedures that need to be submitted.
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