Contents

Chapter 11
A unique market for services

A market with unique characteristics

11.10 Death and dying are inherently sensitive subjects, and grieving families are inherently vulnerable consumers. When a death occurs suddenly, there will be little time to consider funeral options before decisions need to be made. And even when a death is expected, many families are likely to be reluctant to begin enquiries about funeral arrangements until the death occurs.466

11.11Several features of the market combine to suggest that existing regulation may not be adequate. These include the practical difficulty of arranging a funeral without a funeral director, creating a captive market for services; the lack of competition for services in rural areas; the importance of high standards of service for the mourning needs of the bereaved; the time pressures involved for such a large financial and emotional commitment; and the inherent information asymmetries faced by the consumer.

Constraints on consumer choice

11.12While it is perfectly legal to arrange a funeral without a funeral director, it is not straightforward in practice. Most people are ill-equipped to prepare and store the deceased before disposal, and cemeteries and crematoria prefer not to deal directly with the deceased’s family. Few coffin manufacturers sell directly to the public, especially at short notice. Using a funeral director is such a widespread social practice that independently arranging the funeral may also be socially proscribed.

11.13In many parts of New Zealand, there may only be one funeral director within easy driving distance. Rural funeral directors have confirmed to us that they commonly advertise their services across several districts, but most people end up using the closest available funeral director. Even in major centres, FDANZ has informed us that geographical proximity appears to be a major factor in choosing a funeral director, and it is rare for bereaved families to ask for testimonials or otherwise attempt to assess whether previous customers have been satisfied with the service provided.

Emotional and financial significance of purchaseTop

11.14The social importance of funerals is widely acknowledged.467  The funeral is the last occasion at which the deceased is physically present, and its central purpose is to enable grief to be shared, and the deceased to be farewelled. The bereaved family is likely to be heavily reliant on the professional service provider to create a funeral that meets their needs and expectations. Those purchasing funeral services may also be struggling to come to terms with their grief, or may be affected by conflicted emotions that make decisions more challenging.
11.15In addition to these considerations is the factor of price. Funerals present a significant one-off expenditure that can be unexpected and difficult to budget for. A report by Consumer Magazine in 2009 found that the average total funeral-related expense is $8,800.468  This includes the costs and disbursements paid to the funeral director, cremation and/or a cemetery plot, and a headstone, if any. It was estimated that around half this cost is the funeral director’s fee, and 20 per cent the cost of the coffin. The remaining 30 per cent is the cost of burial or cremation. Our research also suggests that the cheapest available funeral option in most areas would be around $2,000 to $3,000 for what is sometimes termed “direct disposal”.469 Unlike most major purchases, there are significant time pressures involved – a point which has been made repeatedly by those calling for greater regulation of the sector:470

Impulse buying, which should ordinarily be avoided, is here a built-in necessity. The convenient equivocations of commerce — "I'll look around a little, and let you know," "Maybe, I'll call you in a couple of weeks if I decide to take it" — simply do not apply in this situation.

11.16 A funeral grant of $1,959 is available from Work and Income New Zealand, and is means-tested based both on the assets of the deceased and the income of the applicant survivor.471  In the 2011/2012 financial year, of the 30,080 people who died in New Zealand, 5,473 grants were paid.472  The Act also makes provision for “burial or cremation of poor persons”, providing that the local authority having the control and management of a cemetery or crematorium may permit the burial or cremation of “any poor person” free of charge or, on the signed order of a justice of the peace, must permit their burial.473  In practice, it appears that this provision not often used, as it has effectively been superseded by the Work and Income grant. However, there is a significant shortfall between the maximum grant payable and the cost of a basic funeral including burial or cremation.

Consumer expectations and suitability of redressTop

11.17With increasing life expectancies and smaller family and community structures in many sectors of society, members of the public are likely to have less direct involvement with death. It follows that there will be less general knowledge about funeral practices. At the same time, the significance of funerals suggests that consumer protection is particularly important in this area. This gives rise to two issues. First, there appears to a mismatch between public expectations of industry standards and oversight, and the reality. Second, due to the nature of the purchase, the framework of the Consumer Guarantees Act 1993 applies somewhat clumsily to this form of service.

11.18FDANZ has informed us that they receive several calls each year from people wishing to lay a complaint against a funeral director, only to discover that the funeral director was not a member of FDANZ. Their impression is that most people assume the industry is subject to mandatory oversight, and assume that the FDANZ has disciplinary authority over all funeral directors. Members of FDANZ and New Zealand Independent Funeral Homes Ltd (NZIFH) have also told us that people are often surprised to learn that there is no requirement for funeral directors and embalmers to be qualified.

11.19Several members of FDANZ and NZIFH have told us that they have at times been required to take over the organisation of a funeral and preparation of a body at short notice after the deceased’s family initially contracted with an inexperienced service provider. Often the family was not aware that the provider lacked qualifications. In some instances, embalming had been attempted without sufficient knowledge of proper processes, requiring extensive remedial work to achieve a presentable appearance for an open casket.

11.20Information about standards of service is difficult to come by. Larger countries tend to have more robust systems of consumer-to-consumer feedback, by virtue of their size. In contrast, many districts in New Zealand can sustain only one or at most two funeral directors474  and, as mentioned above, declining levels of industry affiliation also make it difficult for consumers to assess standards of service. In addition, consumers may not realise that levels of experience and qualifications vary significantly within this sector, so may not enquire about standards.

11.21Funeral directors have informed us that bereaved families rely on the funeral director to provide information about the preparation of the body, legal requirements, and the conduct of the funeral more generally. They therefore depend on the funeral director providing accurate information. We have been informed that most complaints arise from poor communication, including when the funeral director fails to properly understand and respond to the family’s preferences.

11.22 This appears to have been the situation in one case publicised last year under the headline “Natural Burial Traumatises Family”.475  The mother of the deceased refused to pay for funeral services that she considered were substandard, and the funeral provider brought proceedings in the Disputes Tribunal. The decision recorded that:476

The body leakage is an example of where insufficient information was provided to family and friends. To be practically and emotionally prepared the family and friends needed more than an explanation of what could be possible. In particular, there was not enough information about the amount of leakage possible and the traumatic effect it could have on people, particularly children, and how to deal with this. I find the family had genuine concerns here and suffered unnecessary trauma.

11.23This demonstrates the importance of providing reliable and impartial information. Initial preferences may change when the implications are more fully explained. Some families may prefer to embalm once informed of the possibility of odour and leakage; other families may prefer not to embalm once informed that a body can be kept presentable using ice-packs and refrigeration for the first few days after death.

11.24Under section 32 of the Consumer Guarantees Act, if a failure to provide reasonable service cannot be remedied and the contract is not cancelled, the consumer may “obtain from the supplier damages in compensation for any reduction in value of the product of a service below the charge paid or payable by the consumer for the service.” Existing consumer protection law rests on the premise that poor service is occasionally inevitable but can be remedied. This is not an accurate assumption for the funeral sector. Poor service is likely to cause significant emotional distress, and there is very little scope for it to be corrected. While reduced fees may go some way to ameliorating distress occasioned by poor service, it is clearly not likely to be an adequate substitute for receiving good service at the outset.

Information asymmetries: pricingTop

11.25As mentioned above, the lack of general public knowledge about funeral practices is a defining feature of the sector. Individuals are unlikely to seek this information until they need it urgently, by which point it is difficult to assess the options available. In particular, it can be difficult for consumers to obtain accurate information about prices. Most funeral directors do not include a full price list in promotional material. Few funeral directors proactively list a full schedule of costs and disbursements online; most advertise that their prices vary depending on a range of factors, and that a quote can be provided on request.

11.26In the past few years, the cost of funerals has been subject to discussions in the New Zealand media.477  However, it is important to note that concern about funeral prices is not a new phenomenon.478  For as long as people have been paying for funeral services, there have been periodic concerns that prices are too high, often accompanied by anxiety that unscrupulous businesses are fleecing vulnerable families.479 While prices may seem high, the cost of a New Zealand funeral is roughly comparable to those charged in other countries with similar approaches to death and mourning.480
11.27Many commentators have argued that the circumstances surrounding death, including the vulnerability of the bereaved and the difficulty of comparing different providers, require special measures for consumer protection. However, some also argue that the persistency of concerns around pricing reflects an underlying ambivalence about paying for such an intimate service, or a general suspicion of the nature of the work.481
11.28A recent academic study notes that “the fear of the cost of funerals remains an active concern and a real threat for many people today.”482  The study held focus groups with people who had recently been involved in organising the funeral of a close friend or family member. Participants were found to view funeral directors as the “key site for negotiating cost” and “responsible for managing the options people have”. One participant is recorded as saying:483

It goes back to the Funeral Directors too though. They are sitting there opposite you, and they are saying you can have this, this and this, and at this cost you can have this and if you really want you could have this. And once again you are in this frame of mind where you are thinking, ok, yeah looks wonderful, and you know you are overwhelmed with all your feelings and you are just saying yes, yes, yes. So I think a lot of it is on the Funeral Directors, I mean you know they did an awesome job with us, but I think they have got a responsibility and I don’t know who monitors them or keeps an eye on them or whatever happens, but they have got a responsibility to tell people that you don’t have to have a $3000 coffin, you can have a $1600, one which will do the same job and not make you so bad about saying, well actually I want the cheapest one there is.

11.29In our view, the longstanding nature of pricing concerns suggests that it is too simplistic to ask whether funerals are “too expensive”. The more pertinent issue is whether purchasers of funeral services have access to information necessary to make informed choices, or whether they are at an informational disadvantage. Consumer disadvantage is an enduring perception, but is it accurate of New Zealand today?

11.30In the above-mentioned study on funeral costs, the authors concluded that the real issue is the “lack of knowledge, misconceptions, inconsistencies and misinformation about rudimentary funeral organisation.” This includes misunderstandings around the role of the funeral director, extending to a “prevailing assumption that you have to use a funeral director and that they are always really expensive.” The authors’ research suggests, conversely, that many funeral directors are “very willing to negotiate the services they offer.”484

11.31Some funeral directors have told us that bereaved families are uncomfortable talking about expense; others have said that families will at times avoid the lower-cost options available because of the importance placed on a proper final farewell. There is a tension between not wanting to spend too much, and wanting to “do everything right”. FDANZ considers that funeral directors have a role in assisting families to make the best decisions for their circumstances, including avoiding unnecessary costs. At the same time, funeral directors with whom we have consulted also note that there can be unrealistic expectations about what can be provided for a given cost.

11.32New Zealand consumer protection law operates on the assumption that consumers are best placed to protect their own interests, provided they have access to reliable information and the market is functioning effectively.485  Providers of goods and services are prohibited from misleading consumers486  or engaging in uncompetitive conduct,487  but the law does not go so far as to protect the interests of a consumer who fails to negotiate a good price. Rather, it is assumed that consumers have sufficient bargaining power to protect their own interests. Yet this assumption may be questionable if consumers in a given market are at a significant information disadvantage, as a lack of information will make it more difficult for consumers to make the choices that meet their needs; or if they are vulnerable for other reasons. As discussed above, there is some evidence that this is the situation in the funeral sector.
466R McManus and C Schafer Final Arrangements: Attitudes to Funeral Costs in New Zealand (University of Canterbury, 2009) at 51–53.
467See for example Ivan Emke “Therapy, Legitimation Or Both: Funeral Directors and the Grief Process” (paper presented to the Association for Death Education and Counselling conference, Cincinnati, Ohio, March 2003).
468Consumer NZ “Funeral costs” (17 August 2009) <www.consumer.co.nz>.
469This involves cremation in a low-cost casket, and either a very brief funeral service (such as the use of an on-site chapel for half an hour), or no funeral service. Some funeral directors advertise this as a low-cost option; others will provide it but only on request.
470​Jessica Mitford “The Undertaker’s Racket” The Atlantic (Boston, MA, 1 June 1963).
471Work and Income “Funeral Grant” <www.workandincome.govt.nz>.
472Rob Stock “Are we too poor to die?” Stuff (New Zealand, 6 May 2012) <www.stuff.co.nz>.
473Burial and Cremation Act 1964, s 49.
474In 2011, 19 districts had fewer than 100 deaths, and a further 12 districts had between 100 and 200 deaths. See Statistics New Zealand “Local Population Trends” <www.stats.govt.nz>.
475Sarah Young “Natural Burial Traumatises Family” Stuff (New Zealand, 7 February 2012) <www.stuff.co.nz>.
476Living Legacies v Deidre Stansbury Disputes Tribunal Nelson CIV-2011-042-000366, 31 October 2011.
477Stock, above n 472.
478This can be traced back at least to 1843, when Edwin Chadwick published a powerful critique of British undertakers, arguing that:
The circumstances of the death do not admit of any effective competition or any precedent examination of the charges of different undertakers, or any comparison and consideration of their supplies; there is no time to change them for others that are less expensive, and more in conformity to the taste and circumstance of the parties.

If there be any sort of service, which principles of civic polity, and motives of ordinary benevolence and charity, require to be placed under public regulation, for the protection of the private individual who is helpless, it is surely, this, at the time of extreme misery and helplessness of the means of decent interment.
Edwin Chadwick, Report on the Sanitary Conditions of the Labouring Population of Great Britain: A Supplementary Report on the Results of a Special Inquiry Into the Practice of Interment in Towns Made at the Request of Her Majesty’s Principal Secretary of State for the Home Department (W Clowes and Sons, 1843) at 51–53.
479An article in The Press in 1904 decried the lack of price competition among undertakers, and suggested that if the prices were not made more reasonable, the conduct of funerals should be placed in the hands of municipalities, so that “the surviving relatives would know exactly what they had to pay, and there would be no suspicion that they were being preyed upon by an unscrupulous tradesman ready ever to take advantage of their grief.” “Undertakers’ Charges” The Press (Christchurch, Volume LXI, Issue 11828, 27 February 1904, at 6) <www.paperspast.natlib.govt.nz>.
480​In Australia, the average funeral costs between AUD 4,000 and AUD 7,000 (see Choice.com.au “Funeral Costs” (9 February 2011) <www.choice.com.au>). In the United States, the average cost is USD 6,560 (see National Funeral Directors Association “Trends and Statistics” (12 April 2013) <www.nfda.org>). A basic funeral in Britain costs £3,284 while the total expenses relating to death are £7,114 (see Sunlife Direct “Cost of Dying Report 2012” (2012) <www.sunlife.co.uk> at 8 and 10). It should be noted that concerns about funeral costs appear to be prevalent in these countries also.
481McManus and Schafer, Final Arrangements, above n 466, at 74.
482At 9. However, this study goes on to state that “The moral opprobrium toward funeral directors in the literature is an insufficient account of the complexity of people’s attitudes to and negotiations with funeral directors, family and the state.”
483At 62.
484At 72.
485Bill Bevan, Bob Dugan and Virginia Grainer Consumer Law (LexisNexis, Wellington, 2009) at [3.7.2]–[3.7.3].
486Fair Trading Act 1986, ss 9–14.
487Commerce Act 1986, pts 2 and 3.