Funeral Benefit Options with Mark Moran

Golden Charter's Director of Sales provides a step by step guide to Funeral Benefit Options, from initial allocation to the time of need. He explains their recent growth, why they are popular with families, and how they work from a funeral director's perspective.

Transcript

Malcolm Flanders [00:00:04] Hello and welcome to another Partnership Podcast. Funeral Benefit Options, formerly legal charges, have been a rapidly growing area for families who are planning ahead. This time we want to understand exactly how they work and why so many people see them as the right option for them. I'll be talking to Mark Moran, Golden Charter's Director of Sales, about what a Funeral Benefit Option means in practical terms, from the initial allocation to the time of need. We'll also look at their popularity and what's unique about them from a family's perspective. But first, let's get an overview of what a Funeral Benefit Option entails. 

Malcolm Flanders [00:00:49] So Mark, welcome to this podcast and perhaps I can start with a question: I guess in its simplest terms, what is a Funeral Benefit Option and how does it differ from a funeral plan? 

Mark Moran [00:01:01] So if you don't mind, I think I'll start from the perspective of the underlying product that a Funeral Benefit Option sits within. And people will probably recognise a guaranteed over 50s product. They've probably seen it advertised. The main provider there would be someone like Sunlife or someone like British Seniors, who funeral directors would know very well.

Mark Moran [00:01:29] A guaranteed over 50s product is a life insurance policy. It has no medical underwriting, so it allows people to apply for it very simply. Very different to a funeral plan in the sense that when you buy a funeral plan, you're purchasing a range of defined services. A guaranteed over 50s product effectively allows a customer to pay a set premium, which lasts from the day they take out the policy, right through until the policy matures or the person passes away, in exchange for a fixed sum assured.

Mark Moran [00:02:11] Now sum assured is jargon, but sum assured effectively means the sum of money that the customer receives when they pass away. Or the family receives when they pass away. The FBO, as we call it, or the Funeral Benefit Option, effectively is allowing the customer, the policyholder, to redirect the proceeds of their over 50s product to Golden Charter, for us then to redirect to a funeral director, who will carry out that funeral at the time of need.

Mark Moran [00:02:47] In exchange for the directing of that money to the funeral director, the benefit to the customer is that the customer will receive a contribution from the funeral director towards the cost of those funeral services. So the big difference, from the funeral director's perspective, is that this is the equivalent of an at-need funeral. So when the family visit the funeral director, the funeral director will price up their services in the normal way they would for any at-need funeral.

Mark Moran [00:03:21] What we're asking of the funeral director to do in exchange is offer a benefit. And that benefit currently stands at £300. Why £300? Partly because that is the current competitive market. So it's not just Golden Charter who offer Funeral Benefit Options, it's Dignity, and it's Co-op. They offer of benefit of £300; for us to be competitive in the market, we offer an equivalent benefit. That benefit can be provided as a discount. It can be provided just purely as a contribution. So that may be an extra car or some other service the funeral director can offer. 

Malcolm Flanders [00:04:01] Thanks, Mark. And one particular aspect I think would be of interest to funeral directors is how the process differs when the customer dies, in terms of engagement with Golden Charter thereafter.

Mark Moran [00:04:15] Effectively, the process is the same. At the time of application, when we receive notification from British Seniors or one of our partners, that the customer would like to nominate a funeral director or a nominate that the proceeds go to a funeral director, we would send out a pack, in the exact same way we would send a pack for a funeral plan. So at time of claim, at that point it is no different to the normal claims process that someone would go through for a funeral plan. 

Mark Moran [00:04:48] The family would have the paperwork, they'd go and visit the funeral director, the funeral director knows because they've received their copy of the paperwork. The funeral director will price up the funeral in the normal way, and they will notify Golden Charter, provide the invoice to Golden Charter. We will then take care of everything, so we'll deal with insurance company directly. The funeral director deals with the family and deals with Golden Charter. That's all they need to deal with. That's no different to the funeral director process on a funeral plan. And we have quite deliberately tried to make sure it's as simple as possible. 

Malcolm Flanders [00:05:23] Okay. Thank you. That's helpful. And in terms of the cost to the funeral director and how that relates to the competition in the market, how does that work? 

Mark Moran [00:05:33] So clearly, there's two elements of cost to the funeral director. One is the contribution that we ask the funeral director to make at time of need. And that clearly reflects the current competitive market in terms of the costs to the funeral director in addition to the benefit. Clearly, when we acquire any deal with a partner, they have an expectation about receiving some form of remuneration commission, whatever we might want to call it. That again is driven by the competitive market. So there's three main players in the FBO market, and as I've mentioned, that's ourselves, that's Co-op and that's Dignity. So we do look for a funeral director to make a payment for the acquisition of an FBO. That commission and that payment they pay to Golden Charter is designed to reflect the current competitive environment, the same as the benefit, to allow us to win those deals. 

Mark Moran [00:06:40] So clearly we could go with a proposition which is lower, but the risk is we don't win that business. So we have to find a balance to make sure that we can acquire as many of these future funerals as possible for our network.

Malcolm Flanders [00:06:56] So these are normal commercial dynamics in a marketplace, and if we hadn't secured that deal with British Seniors, it would have gone to either Co-op or Dignity?

Mark Moran [00:07:05] Absolutely, - I think this is really, really key: if we decide not to play in that market, it doesn't mean then that no one else will play. When we go to tender for any of these partnership opportunities, you can be absolutely sure it will be ourselves, it'll be Co-op and it'll be Dignity. We know this year we will do approximately 60,000 FBOs with British Seniors, and that's 60,000 funerals that could have gone to Co-op or could have gone to Dignity. And we really feel it's important that we secure as much of that as we possibly can for funeral directors.

Malcolm Flanders [00:07:42] Great. Thank you. That's helpful. Now, we've noticed, this year particularly, there's been an increase in these type of products and we've seen it in allocations to our funeral directors, so what is it about them that makes them attractive to families? Why are we seeing such an upsurge this year?  

Mark Moran [00:07:59] I think you can probably look at it from a variety of ways. We've obviously got the view of the economy. At the moment with Brexit, etc, etc, we've seen people be much more careful about spending lots of money and, you know, consider purchases. What we have seen, the consumer confidence index is at its lowest since 2006. Guaranteed over 50s products allow people to still provide for their funeral, but do it in a way which is incredibly affordable. Because it's a monthly premium, rather than paying three/four thousand pounds that might be required to plan your funeral in the normal way. So I do think that's been a factor. 

Mark Moran [00:08:45] I think also these products are provided by insurance companies who have, again, relatively deep pockets and can afford to market heavily, both online and on TV. You have roughly 300,000 sales of these products every year compared to roughly 170 odd thousand funeral plans. 

Malcolm Flanders [00:09:09] Yes. And I suppose putting ourselves in the shoes of funeral directors, because we know conventionally, and you're Director of Sales, so we've seen our plan sales – it’s been a difficult year this year for actual conventional plan sales. So to the actual funeral director, what are the benefits of FBOs as opposed to funeral plans then?

Mark Moran [00:09:29] I think the key thing, these are at need funerals. And this is a group of people who, from an affordability perspective, are looking to prepare and plan their funeral in a different way. So we can either continue just to focus on funeral plans, but then we've got 300,000, at 70%, 210,000 people who we believe have bought that product to prepare for a funeral. We can either ignore that market, or we can make sure and go and try and acquire as much of that for independent funeral directors as we possibly can. 

Mark Moran [00:10:10] The one thing I would say is that I think it's really important that funeral directors don't just rely solely on Funeral Benefit Options as a source of business. Funeral directors should also remember they actually have almost the equivalent of that product in the own armory. So whether or not that's a low cost instalment plan or the fixed monthly payment product, those are those products that are designed for that consumer, that customer that needs a more affordable option. 

Mark Moran [00:10:38] And then that becomes really, really key, that funeral directors talk about all the payment options, because we do genuinely believe there is as a demand from consumers to understand all the options available to them, to meet all the different budget requirements. 

Malcolm Flanders [00:10:55] Yes. I get that because if you look the demographic of the next five to 10 years, I suspect there's more people who perhaps prefer an instalment approach coming to the stage where they might plan their funeral, and therefore, this range of product becomes far more attractive to that consumer, doesn't it? Okay. Thank you. And again, one or two things I pick up from funerals directors around cancellations and quality, but I understand the average ticket value out of the FBOs is pretty good now. And also the quality has improved for the last 12, 18 months. 

Mark Moran [00:11:23] Yes, so cancellation rate is dropped hugely. And I think that's partly because we have a very strict process in place with insurance companies, when they talk about FBOs. We make sure that they follow a controlled script that makes sure they explain Golden Charter in the right way and the benefits of the FBO. So that's been really important. That's helped drive down cancellations. And the average sum assured there's now over £4,500. Now, that's well ahead of the average cost of a funeral at the moment.

Mark Moran [00:12:03] And I think it's really important, because I know certainly one of the things that funeral directors do question around the FBO is that on occasion they might have a sum assured at £4,500 or £5,000, but occasionally they might have a sum assured which is considerably lower. Now, on some occasions, if someone dies within the moratorium period, all the family get is the return on the premiums. So therefore, that amount of money available for the funeral is actually a few hundred pounds, not a few thousand.

Mark Moran [00:12:35] That is still a sum of money that goes towards an at-need funeral. But that doesn't mean the funeral director's been asked to perform the funeral for the money that they receive. They will still price the funeral up in the way they normally would. So if the funeral’s £4,500 and they receive £500, because someone died through the moratorium, the family are still responsible for the difference. They're responsible for £4,000.

Mark Moran [00:13:02] So I look at it from the point of view that, that is a funeral that the funeral director may not have otherwise got. And again, what we've got to look at is this competitive aspect. If we are not trying to win that type of business from British Seniors, we're absolutely sure Co-op or Dignity are. And that funeral then is lost to the Independents, it's lost into the conglomerate.

Malcolm Flanders [00:13:28] Great, Mark. Thank you. Really appreciate your time today and providing some really good insights for our funeral directors on FBOs. Thank you.

Mark Moran [00:13:36] Pleasure. Thank you.

Malcolm Flanders [00:13:39] Thank you for listening to Golden Charter's Partnership Podcast. We'll have plenty more episodes on the horizon as we enter springtime. And if there's anything you'd like us to discuss in depth, don't hesitate to email me at malcolm.flanders@goldencharter.co.uk. As always, get our full suite of episodes on goldencharter.buzzsprout.com, or wherever you get your podcasts. Thanks again for listening, and I'll talk to you next time on the Partnership Podcast.