FPCOB 16.1 Arrangements for funeral plan continuity or customer reimbursement on firm failure

1In accordance with FPCOB 1.2 (General application), this chapter applies to a firm:

1. (1)

   entering as provider into a funeral plan contract;

2. (2)

   carrying out a funeral plan contract as provider, in respect of new funeral plans.

1. (1)

   1A firm must have arrangements in place to ensure that, in the event of its failure, there will be a reasonable likelihood that the relevant funeral plan contracts will continue to be carried out by another firm that has permission to continue to carry out the funeral plan contract as provider.

2. (2)

   However, the arrangements must not be restricted to only a particular firm or particular firms taking over those services. There must be a reasonable likelihood of the funeral plan contracts being carried out by any firm of that description.

1A firm must also have arrangements in place to ensure that, in the event of its failure and where the relevant funeral plan contracts will not continue to be carried out by the firm or another firm, there will be a good outcome for customers and covered individuals and, in particular:

1. (1)

   there will be no cause for unreasonable delay to any payment that the firm or any other person arranges to be made to any customer or covered individual from the relevant trust or contract of insurance arranged under FPCOB 3.1.6R; and

2. (2)

   the firm’s liability towards any customer or covered individual who may be entitled to a payment in respect of a funeral plan contract (whether from the relevant trust or contract of insurance arranged under FPCOB 3.1.6R or from the firm’s own assets, or both) will not be limited by any contract term to a level below that which would be needed, at the time of the firm’s failure, to purchase a replacement funeral plan contract on terms corresponding, in all material respects, to the funeral plan contract that the firm had entered into.

1A firm’s arrangements under FPCOB 16.1.3R and FPCOB 16.1.4R must, as a minimum, include the following elements:

1. (1)

   The rights and obligations under any contract or deed entered into by the firm with a trustee or insurer under FPCOB 3.1.6R in respect of the relevant funeral plan contracts must make appropriate provision for, and should not frustrate, in the event of the firm’s failure:

   1. (a)

      any other firm (that has the appropriate permission) carrying out as provider those funeral plan contracts with the trustee or insurer remaining in place on the same terms; and

   2. (b)

      any payment which customers or covered individuals may be in a position to claim from the trust or contract of insurance, or from the firm in respect of the trust or contract of insurance.

2. (2)

   The contract or deed referred to in (1) must also require that the trustee or insurer cannot unreasonably withhold its consent to a transfer to another firm that would carry out funeral plan contracts as provider.

3. (3)

   As well as including in each relevant funeral plan contract any terms necessary to ensure compliance with FPCOB 16.1.4R(2), each relevant funeral plan contract entered into by the firm with a customer must provide that:

   1. (a)

      if the firm fails it will be obliged to take all necessary steps to ensure that:

      1. (i)

         in the case of a funeral plan contract for which there is contract of insurance arranged under FPCOB 3.1.6R(1) under which the policyholder is the firm, the customer, covered individual or (on the covered individual’s death) their next of kin will be able to make a claim themselves under the contract of insurance directly to the insurer;

      2. (ii)

         in the case of a funeral plan contract for which there is a trust under FPCOB 3.1.6R(2), the customer or covered individual will be paid their entitlement from the relevant trust (and the funeral plan contract must specifically provide for whether payment will be made to the customer or covered individual) ; and

   2. (b)

      the obligation under (a) will arise on any of the following situations occurring (whichever comes first):

      1. (i)

         the firm ceases to be able to provide funeral services under the funeral plan contract upon the death of the covered individual;

      2. (ii)

         the firm no longer intends to provide funeral services under the funeral plan contract upon the death of the covered individual; or

      3. (iii)

         the firm is neither attempting, nor will it attempt, a transfer of the funeral plan contract to another firm that has permission to carry out funeral plan contracts as provider;

   3. (c)

      the obligation under (a) is not owed if the firm achieves such a transfer;

   4. (d)

      the customer irrevocably appoints the firm, for the duration of the funeral plan contract, as an agent for the purposes of asserting any right or interest that they have in the relevant trust or contract of insurance arranged under FPCOB 3.1.6R, such appointment being without prejudice to the possibility of the customer or covered individual asserting their rights or interests themselves;

   5. (e)

      the customer gives prior and informed consent for the transfer of the firm’s obligations (towards the customer or, where appropriate, the covered individual) under the funeral plan contract to another funeral plan provider in the event of its failure, and that such prior consent:

      1. (i)

         must not be limited to a transfer only to a particular firm or particular firms; and

      2. (ii)

         must only be to:

         1. (A)

            transfers arranged by an insolvency practitioner appointed to the firm that will result in the funeral plan contract being carried out by the transferee on the same terms as the funeral plan contract the customer entered into with the firm; and

         2. (B)

            transfers arranged by the FSCS, in securing continuity of the funeral plan contract under COMP 3.3.3R, with consent to the contract being varied so as to result in the funeral plan contract being carried out by the transferee on terms corresponding in all material respects (so far as it appears to the FSCS to be reasonable in the circumstances) to those which applied under the funeral plan contract entered into with the firm; and

   6. (f)

      no consent is required from any covered individual to the matters in paragraph (e).

4. (4)

   The firm must maintain a single central record containing all up-to-date and pertinent information and documents relating to each funeral plan contract that it has entered into (including through agents) and under which it has any undischarged obligations. The central record must be capable of identifying:

   1. (a)

      every funeral plan contract that could be transferred to another firm;

   2. (b)

      for each funeral plan contract:

      1. (i)

         the name and contact details of the customer, the covered individual (if different to the customer) and any nominated representative; and

      2. (ii)

         the amount paid to the firm by the customer that has, in accordance with FPCOB 3.1.6R, been applied towards a contract of insurance or paid into a trust.

1. (1)

   1Firms are reminded of the disclosure requirements in FPCOB 9.2.7R (Funeral plan summary) and FPCOB 9.3.6R (Nominated representative document).

2. (2)

   In relation to subsisting funeral plans, a firm should consider:

   1. (a)

      notifying each customer and their nominated representative of any arrangements put in place as a result of the guidance in FPCOB 16.1.2G(2);

   2. (b)

      notifying each customer and their nominated representative of any subsequent changes to those arrangements; and

   3. (c)

      where the firm makes such a notification, making it alongside the annual statement required under the rule at FPCOB 9.3.11R.