Don’t get caught out by funeral policy scams

Woman at home on the phone

A recent scam left a policyholder without the funeral cover they thought they had. The policyholder bought a policy from a funeral parlour and paid his premiums, but when the time came to claim - no payment. An investigation showed that the policy was fraudulent - it hadn’t been underwritten by an insurer and the policyholder had no cover with a registered insurer. The policyholder was left out of pocket and unable to lay his loved one to rest. And, it turned out, they weren’t the only one caught in this scam.

While legitimate insurance companies pay out when you need them, there are criminals who sell fraudulent funeral policies - and when policyholders claim, they are left high and dry. We want to make sure this doesn’t happen to you! Here’s what you need to know to avoid scammers and make sure you get the cover you need from a reputable financial services provider who will pay your valid claim in full.

What are funeral policy scams?
In short, someone sells you a policy and takes your money, with no intention to pay your claim as agreed. Reputable companies like 1Life pay all valid funeral policy claims.

We asked the Financial Services Conduct Authority (FSCA), who regulate financial services in the country, about common funeral policy scams. Here is how three of the most common scams work.

An unauthorised business sells funeral policies
In this case, the business or provider selling the funeral policy is not authorised by the FSCA to sell policies.

An unauthorised representative sells funeral policies
The person selling the policy claims to be, but is not, a representative of a legitimate, well-known insurer or other financial company.

The funeral policy is not underwritten by a long-term insurer  
“An important feature of funeral policies is that they are underwritten by a registered long-term insurer,” says Brandon Topham, divisional executive of enforcement at the FSCA. Long term insurers are required to have enough funds to make sure they can settle claims, so you can be certain that your claim can be paid when the time comes.

In the scam we described at the beginning of the article, the policy was not underwritten by a long-term insurer, which meant that the policyholder had no cover with a registered insurer.

Tips to identify and avoid scams
Here are three quick and easy checks you can do to make sure you are dealing with a reputable financial services provider and intermediary:

  • Check that the business or entity is a registered financial services provider on the FSCA website or call their call centre on 0800 20 37 22
  • If you are buying through a broker, check that he or she is indeed a representative of the company they say they represent and registered to sell funeral policies - ask for their full name and a mandate letter (which confirms they represent the company), and use this to check with the company that they do actually represent them. You can also check the registration on the FSCA website
  • Check the policy is underwritten by a long-term insurer - you can find these details on the policy document. Check with them that they are in fact underwriting your policy

Red flags to watch out for
Be careful of these red flags - they can be an indication that the policy is fraudulent:

  • The premium is much lower than premiums for other similar funeral policies
  • There are a lot of complaints on customer service sites like HelloPeter
  • You don’t receive a policy document - the policy document, which has the long-term insurer’s name and details, is usually emailed. If you haven’t received it a few days after signing a contract, follow up with your insurer

Suspect a scam?
If you suspect a scam, you can report it to the FSCA on 0800 20 37 22 or email: [email protected].  

Be sceptical
When it comes to your money, it is best to keep your wits about you to make sure you don’t get scammed. Do your own checks to verify that a person and company selling a funeral policy is reputable and properly authorised so you can be confident that they can and will pay claims in good time and when you need it most.

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