On 29 July 2022, the FCA will start regulating the funeral plans sector. If you’re a funeral plan provider or intermediary, find out what these regulations mean and how to get ready.

What’s Changing?

From July this year activities involving the provision and distribution of pre-paid funeral plans will come under FCA regulation.

All businesses in this market should be taking steps now to apply directly to the FCA for authorisation. Once firms are authorised, they will need to comply with the FCA’s final rules on the regulation of funeral plans. The most up-to-date guidance can be found here. The aim of this regulation is to ensure that the products offered by firms meet consumer needs and offer fair value

Does This Apply to You?

The regulation applies to:

  • Providers: Firms that enter into and administer funeral plan contracts (including in relation to plans that were sold prior to the new rules becoming effective).
  • Intermediaries: Firms that sell funeral plans to customers on behalf of providers (this may include funeral directors and will writers).
  • Insurance firms: Firms that provide life insurance policies that back some funeral plans.
  • Trustees and Discretionary Investment Managers: Where the role is carried on in relation to trusts that back some funeral plans.
  • Trade bodies: These represent firms that carry out or sell funeral plan contracts.

 What Do the Rules Mean for Your Business?

The rules mean:

  • Funeral instalment plan products will always deliver a funeral (after a moratorium period) as the FCA will be banning those that don’t guarantee this.
  • Cold calling will be banned and new standards on advertising will be implemented to ensure plans are sold fairly.
  • Commission payments to intermediaries will be banned to ensure products represent fair value.
  • Those selling funeral plans are subject to full checks on their fitness to operate to improve governance standards and oversight.
  • Funeral plan providers will need to ensure that the contracts of insurance that are used to back a funeral plan are compliant with the new requirements in the Funeral Plans Conduct of Business Sourcebook (FPCOB).
  • Providers and intermediaries will have to provide 6-monthly prudential returns and annual complaints return, with providers also being required to provide quarterly conduct returns.
  • The Senior Managers and Certification Regime (SMCR) will apply to authorised funeral plan providers so firms will need to ensure that Senior Managers are aware of their responsibilities under the new regulations and that all staff are aware of and appropriately trained on the Conduct Rules.

All published rules are available to consult using FCA policy statements and set out in the FCA Handbook.

How To Prepare?

If you undertake any of the activities discussed above and wish to continue, you will need to start taking steps to ensure your business is compliant with the new FCA rules and regulations.

Firms that want to continue conducting funeral plan activities should prepare now and apply for authorisation. The application gateway opened in September 2021. For applications made after November 2021, the application fee will increase by 40%.

Any firms that are not authorised or do not become Appointed Representatives by 29 July 2022 will have to cease trading in relation to funeral plans. From 29 July this year, it will be a criminal offence for plan providers to carry out funeral plan contracts without authorisation.

How Can I apply For Authorisation?

You will need to fill out an application for direct authorisation from the FCA. For more details on preparing an application and the application process click here. Do not delay- leaving the application for authorisation until the last minute brings the risk that your firm will not be authorised by 29 July 2022.

How Can We Help?

The new rules clearly present a challenge for providers. These significant new requirements will take some adjusting to and will make compliance increasingly complex, time-consuming and expensive without a software solution.

At 1RS, we have built ERIC a low cost, effective software to automate all your operational risk, conduct risk and regulatory compliance activity. We can also provide a dashboard-driven solution to manage your SMCR regulations and demonstrate compliance. Our experts at 1RS can help you understand which FCA rules and provide best practice controls you should have in place to comply.