12.1The previous chapter discussed the nature of the market for funeral services and the issues that may arise as a result of market factors. In this chapter, we present three possible options for reform and discuss the advantages and disadvantages of each option. These options are intended to complement the existing framework, and have been tailored to address structural features of this market without introducing new measures that are overly interventionist or unduly restrictive on funeral service providers. We seek a funeral sector that is flexible and responsive to consumer preferences, with consistently high standards.
12.2Based on this underlying principle, we put forward three options for improved oversight of the sector. The first is to introduce new pricing and services disclosure provisions for the benefit of consumers. The second is to require funeral service providers to be licensed by local authorities. The third option would require providers to be bound by a code of ethics enforced by an industry complaints body.
12.3These reform options are intended to respond to the issues identified in the preceding chapters. In particular, our proposal for increased transparency arises from our evaluation of the unique characteristics of this market, and the difficulties for the bereaved in obtaining information because of the time pressures involved. We do not suggest that there is a significant problem of funeral directors taking advantage of consumers; rather, we suggest that this is a market in which asymmetries of information are particularly problematic, and that this could be addressed through increased disclosure. In the absence of widespread voluntary disclosure, mandatory requirements may be justified. We encourage submissions from the general public and the funeral sector to enable us to better assess the functioning of this market and, in particular, whether increased pricing transparency is needed.
12.4We note that the proposed options vary in the level of additional obligations, providing a graduated response to the issues. For example, requiring additional disclosure is a light-handed intervention, while licensing would provide more significant additional consumer protection. Retaining the status quo as described in chapter 10 also remains an option.
Option 1: Increased transparency
12.5Option 1 would require providers of funeral services to disclose specific information about pricing and other features of the service provided. This is intended to better facilitate consumer choice, and enable purchasers of funeral services to protect their own interests. Disclosure obligations are a feature of other sectors and are used to improve transparency and address information asymmetries present in a market. This option represents a relatively light-handed measure.
Option 2: Licensing of funeral service providers by local authorities
12.6Option 2 would build on the existing registration requirements to establish mandatory licensing of funeral service providers by local authority health inspectors. This is intended to protect public health and consumer interests through providing a minimum standard of service provision, based on knowledge of health matters and legal requirements. Offering funeral services to the public for a fee without a licence would become an infringement offence.
Option 3: Industry complaints authority
12.7Option 3 would require licensed funeral service providers to accept the jurisdiction of an industry complaints body that provides a code of ethics and a complaints mechanism for a breach of this code. One possibility is to establish a new industry body, possibly with consumer representatives. Another possibility is to provide an approvals process for existing industry bodies, and any new industry bodies seeking to become established.
12.8These options are not mutually exclusive and any reform could be based on any combination of them. Our current preferred approach would be to combine increased transparency with licensing of providers by local authorities (options 1 and 2). We consider that this combination would promote improved standards of service and ensure adequate protection of public health and consumer interests, without imposing unwarranted additional costs on either the funeral services sector or local authorities (although we acknowledge that this approach is not without cost implications).
12.9We have considered whether additional reforms specifically directed at embalming are required. In particular, the New Zealand Embalmers Association has repeatedly called for mandatory qualifications of embalmers. However, at this stage we think that there is insufficient justification for this reform. We are concerned that the regulatory framework needed to enforce this requirement would present costs that outweigh the likely benefits, especially regarding enforcement.