The government is launching a crackdown on unscrupulous funeral firms that use "shameful" tactics to pressure customers into buying pre-paid plans.
Under the proposed changes, funeral firms that mislead and use high-pressure sales methods could face fines and criminal charges.
The regulation of the sector will now be overseen by the Financial Conduct Authority (FCA) which will design a new framework of regulation to ensure that providers are clear and fair in their treatment of customers.
This will also offer people access to the Financial Ombudsman Service, giving consumers more protection.
The move comes after a call for evidence last year showed widespread concerns around the conduct of funeral plan providers, with some employing high pressure and misleading sales tactics in order to get customers to sign up to plans.
City minister, John Glen MP, says: “Planning for your funeral can be a difficult experience, but one that many of us will need to go through at some point in our lives.
“It’s shameful that there are those out there who look to prey on people when they are in this often emotional and vulnerable state.
“That’s why I’ve taken the decision to regulate pre-paid funeral plans, so people can have more confidence in the products they’re being offered and peace of mind that their affairs will be handled correctly.”
Demand for funeral plans has grown by nearly 200% between 2006 and 2018. Last year, 177,000 plans were sold and cost on average between £2,500 and £5,000.
Last June, the Competition and Markets Authority launched an in-depth market investigation into the funeral sector to examine whether information provided by funeral directors on prices and services is clear enough for consumers.
The average cost of a funeral is now £4,271, with many people typically paying between £3,000 to £5,000, two-thirds higher than a decade ago.
Some of the largest firms have increased prices between 6% and 8% each year for the past eight years and some local authorities have hiked fees even higher, the watchdog says.
The CMA says that the reluctance of firms to disclose clear prices, including online, or to provide comprehensive information on quality and range, makes it difficult for people to compare funeral directors.
Royal London’s funeral expert, Louise Eaton-Terry, welcomes the proposal and says it will give consumers greater protection.
She says: “With the cost of funerals rising above inflation, a funeral plan allows consumers to secure their funeral in advance and protect against future price increases. The services covered by funeral plans vary among providers which isn’t always clear.
“Many consumers are unaware that their plan might not cover the full cost of the funeral, which can result in grieving loved ones being left with unexpected extra charges.”
The funeral planning market is currently self-regulated by industry body the Funeral Planning Authority.
Graeme McAusland, CEO of the Funeral Planning Authority, says: “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.”