12.14This potential reform is focused on both pricing and standards of service and is intended to address the existing information asymmetries within the sector to enable consumers to better make the choices that meet their needs. This option has been developed to respond to the particular features of the sector that interfere with consumers making an informed purchasing decision, as discussed more fully in the previous chapter.
12.15Under this proposal, funeral service providers would be subject to the following obligations:
12.16Itemised prices would be required in any quote or estimate provided and in any final invoice. For example, the cost of the coffin, professional services, and embalming would need to be listed separately.
12.17In addition, promotional materials listing the different services would also be required to include prices. For example, a pamphlet that lists the specifications of different coffins should also list the price of each coffin. Funeral service providers would be required to prepare an indicative general price list made available in writing to the deceased’s family or on the website of the funeral home. This would address the difficulty consumers can experience in researching available options, given the need to make decisions quickly.
12.24Unlike these jurisdictions, New Zealand has no consumer protection rules specifically directed at the provision of funeral services. Consumers face significant difficulties in researching the nature of services provided and the prices of different funeral options. We consider that this is in itself a problem, whether or not it is leading to poor service or uncompetitive pricing. In particular, a lack of readily available information about pricing makes it more difficult for consumers to make an informed purchase. Markets rely on adequate information flows to function efficiently.
12.25We further consider that the nature of the sector means that in some respects, any issues arising are likely to be “silent problems”. A number of factors make it unlikely that consumers will complain or lobby for improvement, including the distractions of grief, the short time-frame in which decisions are made, the desire for closure for the bereaved family and friends, and dignity for the deceased. Purchasing decisions in relation to funeral arrangements are often made in extremis, especially when a death was not anticipated. Social taboos about discussing funeral arrangements do not encourage consumers to be well informed or prepared in advance, and negotiating lower prices may be seen as disrespectful to the deceased. They are exceptional transactions from a consumer’s perspective, made only occasionally in life, rather than routine transactions where consumers have clear expectations. These circumstances make it unlikely that consumers will draw attention to perceived shortcomings unless these shortcomings are egregious.
12.26In addition, it is our view that the particular consumer protection interests operating in this market may justify a more proactive approach to disclosure of relevant information. The timeframes involved do not permit extensive consumer research, and the emotional state of the mourners may also affect financial judgment or negotiating power. In some areas, particularly rural areas, the small number of providers means that there is limited competition and therefore lower incentives for providers to inform the market. There is therefore a case for considering whether disclosure requirements should be introduced to correct an existing imbalance and to protect consumers.
12.27We have also considered stronger measures that have been adopted in comparable jurisdictions. For example, it would be possible to require funeral service providers to allow customers to independently source items such as the coffin, catering, and memorial booklet, as in the United States. It would also be possible to set a maximum mark-up for coffins distributed by funeral service providers. However, we consider clear evidence of market distortions would be needed to justify considering such measures, given the existing restrictive trade practice provisions in the Commerce Act 1986. We therefore do not explore these further at this stage and have focused instead on transparency measures, which sit with the existing consumer protection framework.
12.29 A minimally regulated market has the advantage of low barriers to entry, but the current system may not best protect and promote the interests of consumer protection, public health, compliance with legal requirements, and public expectations about the respectful handling of the deceased. We are particularly concerned that there appears to be a public expectation that the sector is subject to a level of oversight which is, in fact, absent.
12.30Our second option would require funeral service providers to be licensed by local authority health inspectors. This would be a logical extension of existing requirements for the registration and inspection of mortuaries, and is within the general public health functions of local authorities. This requirement would be directed primarily at ensuring all funeral service providers have an up-to-date understanding of the health risks posed by dead bodies and knowledge of the appropriate means of mitigating offence caused by bodily decomposition.
12.31Under this option, an applicant for a funeral service provider’s licence would be required to demonstrate understanding of the following:
12.32Knowledge would be demonstrated through an interview with an environmental health protection officer. The local authority would issue the licence, and would be able to recover the processing costs from applicants.
12.33We also suggest that funeral service providers should be required to demonstrate that they have access to suitable premises for the preparation of the deceased and access to a suitable means of transportation. If this option were adopted, offering funeral services to the public without a licence could be established as an infringement offence under regulations, enforced by the local authority under the Summary Proceedings Act 1957.
12.34We also suggest that licences should require periodic renewal. The timeframe for renewal should ensure sufficient oversight to account for changes in best practice, without requiring unnecessarily frequent applications.
12.35These obligations would only apply to those who meet the definition of a “funeral service provider”, as with Option 1. This definition is limited to those who provide services to the public for a fee. Therefore, voluntary groups that prepare the dead for burial would not be required to hold a licence. We consider that so far as reasonably possible, the law should accommodate different approaches to the handling of the deceased. The protection of religious freedoms in section 15 of the Bill of Rights Act and the protection of minority rights in section 20 also require that the framework should not unnecessarily obstruct the observance of burial practices by ethnic or religious groups. This means that any requirements directed at other matters of public interest need to be carefully considered to ensure that they do not inadvertently restrict different legitimate preferences of our diverse society. We do not consider there is sufficient public interest to justify imposing obligations on people who provide funeral services free of charge through religious groups or other community groups, and we are concerned that these obligations would be an undesirable barrier to the ability of such groups to meet their own burial needs. We invite submissions as to whether it is appropriate to distinguish between those who offer funeral services for a fee and those who undertake such services on a voluntary basis.
12.36We have received feedback from local authorities about the current registration process. All local authorities with whom we spoke confirmed that the registration of funeral directors was essentially a pro-forma exercise, and that they understand the regulations to be directed primarily at standards for premises. Several noted that they were unsure what purpose the registration of funeral directors serves, given that there are no grounds to reject an application for registration and no sanctions for failing to register. In contrast, mortuary inspections are undertaken by environmental health officers, who check for compliance with the regulations and can require any issues to be remedied.
12.37We are concerned that current oversight of public health and safety issues that arise in relation to the handling of dead bodies is insufficient because of the lack of an appropriate regulatory mechanism. We consider that licensing would afford a suitable measure of assurance, and that public health and safety is likely to be better protected if environmental health officers have a role, similar to mortuary inspections, in confirming that funeral directors have a basic understanding of the public health risks associated with handling dead bodies. This approach would provide a minimum level of external oversight.
12.38Importantly, this approach does not require funeral service providers to have a formal qualification. If a candidate is able to demonstrate knowledge of the relevant issues, the local authority would be required to grant the licence. A variation to this approach would be to require a character check. Local authorities already have systems in place for this as part of their liquor licensing role.
12.39Subject to feedback from submitters to this Issues Paper, our preliminary view is that this option meets the threshold for an effective and necessary industry requirement to protect public health, consumer interests, and ensure compliance with other matters of importance such as requirements to register a death. In principle, we consider that all providers should be able to meet the standards set out above and that this should be independently verified through the licensing mechanism, which will provide assurance to consumers. If someone is offering funeral services to the public without adequate knowledge of the necessary health precautions and means of mitigating offence caused by bodily decay, there is a risk of poor standards of service and potentially a risk to public health more generally. It is arguable that the current lack of oversight of the sector does not meet public expectations, and has the potential to create adverse outcomes.
12.40 The alternative critique of this option may come from those who consider that licensing is a positive but not sufficient step. In our view, further evidence of industry shortcomings would be required to justify more extensive regulation. For discussion purposes we have developed an alternative in Option 3, which would provide greater oversight through compulsory complaints processes. We invite submitters to compare the merits of Option 2 and Option 3, and consider where the appropriate balance should be struck between maintaining an open sector and the imposition of regulatory standards.
12.41 Options 1 and 2, either combined or individually, may be considered a sufficient response to the issues at hand. However, based on initial feedback from the funeral sector, we have also considered an additional measure which is intended to foster higher standards and better enforcement of complaints. This option is to require providers of funeral services to abide by a code of conduct and complaints procedures of an independent body.
12.42We have spoken to many members of FDANZ who consider that there should be some form of compulsory complaints mechanism, possibly through mandatory affiliation with their own organisation or another approved industry organisation. Some funeral directors consider that this would promote higher standards and allow for more effective enforcement in response to consumer complaints. It is argued that a compulsory code of conduct would be a useful way of ensuring that all funeral directors meet consumer expectations of professional standards within the sector, and would address the concern that existing industry bodies are less than fully effective because many funeral directors choose not to join, and are not subject to any professional standards.
12.43Compared with the status quo it is argued that a compulsory code of conduct would establish clear expectations for standards of service, and prevent unreliable providers from taking advantage of vulnerable consumers. This option may be preferred to licensing for several reasons. First, the code of conduct would establish standards of service rather than standards of knowledge. Second, there would be mandatory sanctions for a failure to meet these standards, and remedies for consumers if standards are not met. It could be argued the combination of these two factors would better protect consumers, who will have greater confidence in the level of service to which they are entitled. Finally, this option could also be preferred to licensing because codes of conduct are more flexible than regulations, and can address a wider range of issues. This option may also be preferred because it does not place an additional enforcement burden on local authorities.
12.44We have considered two possibilities for the development of this option. One possibility is to establish an independent body, perhaps with some lay members representing consumer interests. This industry body would develop a mandatory code of conduct and a complaints mechanism, which would apply across the sector.
12.45A second possibility, and one that is more likely to be favoured by some in the sector, is to provide an approvals process for existing and new industry bodies. Industry bodies would have to demonstrate that they have a robust code of conduct and effective sanctions against members who breach these codes. Funeral service providers would have to be affiliated with an approved body but could choose which industry body to become affiliated with. New industry bodies (for example, one focused on eco-funeral services), could be established. Under this model, it would be prohibited to offer funeral services for a fee without agreeing to be bound by the code of conduct and complaints mechanisms of an approved industry body.
12.46We consider that the “complaints authority” model is a better option than the “compulsory affiliation” model. A complaints authority acting to enforce a code of conduct has the advantage of independence, and would be accountable to the general public. Conversely, an inherent conflict arises between a regulatory role and an industry representative role, which presents a significant challenge for the compulsory affiliation model. When affiliation is voluntary, industry bodies are free to develop their own codes of conduct and enforcement mechanisms, consistent with an overall purpose of providing services to members. The industry body remains accountable to members, and the complaints mechanism can be seen as a secondary feature to ensure the reputation of the organisation and its membership is not undermined by the unwelcome behaviour of a minority of members. However, if affiliation is compulsory and is for the purpose of making complaints mechanisms available to all consumers, the conflict arises.
12.47Of the two models, we therefore prefer the independent complaints authority option. This model would require a new industry body to be established with the limited mandate of (a) formulating a compulsory code of conduct, and (b) determining complaints against this code. We have not developed the operational details of this model, such as the funding mechanisms or the process for developing the code of conduct. Whether this option is developed further will depend on submitter feedback.
12.48Establishing a mandatory code of conduct presents some significant challenges. In particular, in an increasingly diverse sector it will be difficult to develop a single code for the range of service providers currently operating. The type of service provided by a traditional funeral home is very different to that provided by the facilitated home care or natural funeral alternatives.
12.49There is a risk that a mandatory sector-wide code would interfere with the ability of new providers to enter the sector and provide services that respond to a currently unmet public need. It may also negatively affect some existing providers who offer alternative funeral styles. Improved standards achieved through a mandatory code will lead to a loss of flexibility and innovation. There will also be costs involved in establishing a sector-wide code and a suitable complaints process.
The research also suggested that people may be reluctant to complain as many have a strong need to believe that the funeral provided was the best in order to minimise further distress. There is an almost unconscious sense that a ‘good’ funeral is necessary to initiate the healing process of the bereaved. If anything goes wrong it will be remembered forever, as there will be no second chance ... To complain may simply prolong the grief.
12.51 Our preliminary view is that compulsory licensing under Option 2 will effectively address the concerns that give rise to calls for mandatory codes of conduct. At this stage we do not think that Option 3 is needed as an additional measure, and we also consider that it is likely to be a less effective alternative. However, we acknowledge that industry members have identified some potential advantages and we therefore invite submitters to compare these two options to inform our final view. In particular, we invite submitters to consider the relative advantages and disadvantages of a reform that requires all providers meet a minimum standard of proficiency, enforced through licensing; and a reform that requires all providers to meet standards of service set out in a code of conduct, enforced through complaints provisions.
12.52 We also note that if Option 3 is not favoured, industry bodies would retain their existing role. The continued use of voluntary codes of conduct would arguably be more effective if the disclosure obligations in Option 1 are adopted (that is, requiring service providers to proactively disclose their affiliation or lack of affiliation with a body that provides a code of conduct and complaints mechanisms). The voluntary standards established through voluntary codes of conduct could complement the compulsory minimum standards introduced through a licensing requirement and result in a sector that meets higher standards overall, without significant new costs.