Current reviews of the UK funeral market: implications for practitioners

CMA market research

The CMA commissioned two sets of research: a quantitative study from Ipsos MORI to analyse the numbers in the market and a qualitative study from Research Works, which was the result of 80 in-depth interviews from people who had organised a funeral in the last year.⁸ The reports were published on 16 October 2018. The findings from the Research Works market research included the following:

• Consumer knowledge about how to arrange a funeral was ‘broad and relatively vague’ (page 5).
• The expense of funerals was not scrutinised at the point of need as long as it fitted with a consumer’s ‘ballpark’ estimate (page 5).
• Most people did not think it would be appropriate to negotiate the cost of a funeral because it would ‘make them feel and seem like a cheapskate’ and would reflect badly on them and the deceased (page 8).
• Quality was judged in terms of service where a funeral director had gone ‘above and beyond’ to support those arranging a funeral emotionally and helped to achieve a meaningful farewell (page 9).

Interim report, consultation and notice of proposal to make a MIR

On 29 November 2018, the CMA presented its initial findings on the UK funeral market in a 133-page interim report.⁹ The CMA announced that its initial work had indicated ‘problems with the market’, which it claimed had led, over the last 10 years, to ‘above inflation price rises’ for funeral director services and crematoria services, adding that the scale of these price rises did not ‘appear to be justified by cost increases or quality improvements’.¹⁰ 

Summary of the CMA’s interim report

The CMA’s report notes that, in 2017, there were 607,000 deaths in the UK, 513,000 of which involved a funeral that had to be paid for by the bereaved at the time of death. The average cost of the ‘essential elements of a funeral now stands at nearly £4,300’, with another £2,000 being spent on items, including flowers or catering (page 6).

The report adds that the funerals industry is ‘large in value terms’ and the issues with it ‘are likely to affect a large proportion of customers’ (page 8). It says that should any MIR identify an adverse effect on competition, then appropriate remedies are likely to be available at the end of the investigation. The CMA wants the scope of its MIR to relate to the ‘supply of services by funeral directors at the point of need’ as well as the ‘supply of crematoria services in the UK’ (page 8).

The CMA has the following concerns:

• Funeral prices are ‘too high’ being a real issue for those on low incomes (page 10).
• Price increases over the long term have been ‘above inflation’ (page 10).
• Significant price differentials across burial or cremation fees and funeral directors in the same locality.
• Lack of pricing information transparency.
• Difficulties in comparing funeral packages.
• Consumer protection issues relating to pre-paid funeral plans, including concerns that product limitations are rarely made clear or that the cost of a funeral may exceed the cover offered or ‘high-pressure selling’ allegations or high cancellation fees (page 11).

Cremations and crematoriums

The regulatory regime is set out in the Cremation Act 1902, which has changed little over the past century. The CMA starts by reporting that the proportion of funerals involving a cremation has grown steadily over the last 60 years from 35% in 1960 to 77% in 2017. The larger operators of private crematoria have ‘implemented average price rises of between 6% and 8% every year for the past 8 years’ claiming too that ‘meeting shareholder expectations’ has been the main factor underlying these large annual price rises (page 7). The CMA reports that average cremation fees increased by 84% in the 10 years to 2017, which is more than three times the consumer price index rate.

Presently, there are 293 crematoria in the UK and 183 of these are operated by local authorities. In England, Northern Ireland and Wales, local councils can charge for discretionary services on a cost-recovery basis only (but Scottish councils can charge such fees as they see fit). The CMA claims that because of austerity cuts, some local authorities have ‘implemented … large fee increases at their crematoria’ but notes that the cheapest crematoria still remain those run by local authority, with the 20 most expensive crematoria being privately owned and run (page 6).

The David Bowie effect?

Direct cremations are a relatively new low-cost funeral option that is increasing in popularity. This type of funeral, ‘in which no service is offered’, does not, in general, envisage anyone attending (page 66). Cremation-only funerals are offered by direct cremation providers and most funeral directors, but still account for only a small proportion of funerals.

Burial grounds and cemeteries

The CMA received representations that burial costs have ‘increased significantly’, with one respondent claiming they have gone up around 80% since 2007 (page 11).

Proposed action by the CMA

For the reasons set out in the report and consultation, the CMA is proposing to make a reference under section 131 of the Enterprise Act (EA) 2002 in relation to the UK supply of services by funeral directors at the point of need and crematoria services.

The CMA will publish its market study report, no later than 31 May 2019, containing its decision to either make a section 131 reference; accept undertakings under section 154 of the EA instead of making a reference; or make no reference.

HM Treasury announcement in relation to the funeral market

On 1 June 2018, HM Treasury issued a call for evidence on prepaid funeral plans.¹² It claims that concern has grown about the ‘potential risk of consumer detriment’ within this sector, noting that while demand for funeral plans has ‘grown considerably in recent years’ the 2001 regulatory framework remains ‘unchanged’ (para 1.1) (see below).

‘Citizens Advice Scotland and Fairer Finance have highlighted numerous failings in the sector, including a lack of clarity for consumers, high pressure and misleading sales activity and a lack of access to redress schemes if things go wrong. Fairer Finance has also raised doubts about the financial soundness of some trust-based providers’ (para 1.1). The Financial Conduct Authority’s (FCA’s) view is that all existing UK funeral plan providers meet an exemption set out in article 60 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 SI No 544, which governs the regulatory framework for funeral plans. For this reason, no funeral plan provider is authorised or regulated by either the FCA or the Prudential Regulation Authority in relation to this activity.

HM Treasury concerns

HM Treasury sought views on a number of questions including whether:

• funeral plan providers are always the policyholder of underlying insurance policies;
• there are conflicts of interest between funeral plan providers and funeral directors;
• the way in which funeral plan providers communicate with consumers or prospects is satisfactory; and
• there is consumer detriment at the point of sale or if cold calling presents a risk to consumers.

The call for evidence also sought to drill down into the financial aspects of pre-paid funeral plans by seeking among other things to establish the following:

how much consumers pay for funeral plans;

• what consumer protection measures are in place currently and how effective these are in practice;
• what protection is currently in place if a funeral plan provider were to have insuÿcient money to pay out claims;
• if the Financial Ombudsman Service should be able to consider complaints about funeral plans;
• whether trustees managing trusts on behalf of funeral plan providers have effective strategies in place to secure the longterm interests of funeral plan holders;
• whether the FCA should start to regulate all funeral plan contracts and what the shape of this regulation should look like; and
• how long a transition period is needed to enable funeral plan providers to adapt and comply with any new rules.

Possible next steps from HM Treasury

The call for evidence closed on 1 August 2018. David Reeves, a policy adviser in the personal finance and funds section of the HM Treasury Financial Services Group, says that HM Treasury is ‘continuing to review the submissions’ and ‘will publish a response in due course’.