Regulation of the Prepaid Funeral Plan Sector

Following publication of the FCA Consultation Paper (CP21/4) on 2nd March 2021, the roadmap towards regulation of the prepaid funeral plan sector has been set. 

The consultation phase ends on 13th April 2021, following which the FCA will consider the findings with regulation coming into force on 29th July 2022.

So what exactly does regulation mean for businesses operating within the prepaid funeral plan sector?

Having been at the forefront of regulatory preparations for the general insurance sector in 2005, the team at UKGI is well-placed to prepare firms for the implications of statutory regulation for those operating in the prepaid funeral plan sector, specifically:

1: The Authorisations Gateway for applications opens in September 2021. 

Whilst the application form is being consulted on, it is unlikely to be radically different from existing equivalents used in other financial services sectors and the consultation paper provides a list of the supporting information that will be required.

The advice is simple – prepare, prepare, prepare and more importantly, start now! Much of the work can be completed ahead of time and with the support of UKGI’s existing authorisation framework. Speak to the team at UKGI regarding your plans as soon as possible.

Businesses should ensure that they have started work to prepare for FCA regulation and their application for authorisation in good time, ready for submission at the start of the gateway window opening in September 2021. 

Those that are currently operating within this sector that fail to submit an authorisation application by November 2021 may incur a late application fee; furthermore, payment of the late fee does not guarantee approval by July 2022, which may leave those late in applying unable to trade. 

2: Application approval is by no means guaranteed. 

Businesses must compile a suitable and high-quality application. It is not a ‘tick box’ exercise and there may be no time for second chances. 

UKGI has a vast amount of experience in compiling applications for regulatory authorisations, designed to meet the expectations of the Regulator. Prior experience of communicating with the Regulator on behalf of our clients and our understanding of the FCA’s expectations allows us to provide the appropriate level of support and guidance for applicants.

Businesses submitting an application must be in a position to demonstrate that they are ‘ready, willing and organised’ at the point of application – this means that the business must not leave all preparations and the implementation of revised processes to the last minute.

UKGI can help build an applicant’s governance and compliance framework, provide templates backed by flexible support to draft business specific policies and procedures, keeping it pragmatic and proportionate.

3: Business Plan, Financial Viability and Sales Processes

Upon application firms must provide a regulatory business plan, details of continuity and disaster recovery measures including a wind-down plan. The FCA’s expectations of a business plan differ from a typical business plan, as it should include details of your proposed business model, key regulatory and operational risks, risk mitigation measures and how the business will comply with its regulatory obligations. UKGI is able to provide templates and guidance to support applicants.

The Regulator will also want to see details of the solvency and financial viability of the business, including a balance sheet, profit and loss report, cash flow statements, asset adequacy report, etc.

The business must be able to provide details of how it intends to control and oversee the sale of prepaid funeral plans. This process must be articulated in a satisfactory manner.

Where a firm intends to become a Principal firm and will take regulatory responsibility for Appointed Representatives (AR) the application will need to include details of how the firm intends to provide sufficient oversight of the activities of these AR’s, irrespective of their geographical spread.

4: SMF Applications

Applications for Senior Management Functions (SMFs) must be submitted at the same time as the main application, which increases the volume of work, requirement for support and guidance, which may impact upon the organisation’s structure, roles and responsibilities. Alongside determining your business model, you will need to be thinking about those key individuals and who will be best suited to this new regulated landscape.

Next steps

The above snapshot is not an exhaustive list of tasks – it is intended to highlight the amount of work entailed in a regulatory application and the complexity of the tasks involved.

Whether your business choses to apply to become Directly Authorised or an Appointed Representative, the journey begins with your application. To help make sure it is prepared on time and to a suitable standard, contact the team at UKGI today to discuss your requirements.

Nikki Bennett
Managing Director

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