The FPA is extremely disappointed with the conclusions from this call for evidence. It is our belief that HM Treasury has settled on the FCA as a solution for reasons of political expedience, yet the problem, and the solution itself are both largely undefined. After 10 months of consideration, this lack of clarity and thought is deeply disappointing.
The original consultation was prompted by concerns around sales processes, and money available to pay for funerals when they were needed. These concerns were principally related to the 5% of the market not regulated by the FPA.
Since the consultation began, we have seen the implementation of GDPR, which has driven significant improvements in how firms use personal data, and the permissions around that data (for sales purposes). Therefore, the primary concern must be prudential issues; is there enough money set aside, and is it being managed appropriately to provide the funeral when needed. Prudential challenges like this are not the FCA’s area of focus, and furthermore this market is significantly smaller than any other market they regulate, meaning it is likely to get far less scrutiny.
The outcome of this decision means increased costs for customers, as the greater cost of regulation will drive out smaller providers from the market. Customers will also be put at risk by reduced oversight of funeral plan providers, and a lengthy transition period where bad practice could happen among plan providers, without fear of reprisal. The response from HMT is implicit about customer detriment happening currently but goes no way to quantify this, and shows lack of understanding of the risks posed in future following this decision. The proposed new regime also appears completely disjointed, as there has been no co-ordination between HMT and the CMA, who are currently investigating the funeral sector as a whole.
We suggested the government could make the FPA the statutory regulator; an option supported by the vast majority of the market, including providers not currently registered with us. This outcome is so much better for customers; giving them greater reassurance, protection and choice. We are deeply disappointed that this appears to have been disregarded by HMT.