"We are pleased that 87% of the market is now under regulation. With our new rules in place, consumers will be better protected, when they need it the most."
The regulation means the FCA is authorising 26 providers, which together hold approximately 1.6 million plans, equivalent to 87% of the market.
New rules include a ban on cold calling and a ban on commission payments to intermediaries, such as funeral directors.
In addition, a funeral plan must deliver a funeral unless the customer dies within two years of taking out the plan, in which case a full refund will be offered.
Customers of authorised providers will now have access to the Financial Services Compensation Scheme (FSCS), so their money is protected if their provider fails. Consumers can also make a complaint to the Financial Ombudsman Service (FOS), even if the issue they are complaining about happened before July 2022 if the firm was registered with the Funeral Planning Authority (FPA) at the time the issue occurred.
13 firms that applied before 1 March 2022, but have not been authorised, have until 31 October 2022 to transfer their plans to authorised firms or refund their customers. These plans are not covered by FCA regulation, meaning there is no protection by the FOS and FSCS until they are transferred to authorised providers.
Emily Shepperd, executive director of authorisations at the FCA, said: "We have worked tirelessly to assess funeral plan providers, under our robust authorisation process. We are pleased that 87% of the market is now under regulation. With our new rules in place, consumers will be better protected, when they need it the most.
"It is unfortunate that a number of firms chose to exit the market, leaving customers, who had sought peace of mind for their loved ones, understandably worried. It is a good outcome for consumers that some providers have stepped in to provide funerals for the customers of these providers at short notice. We also continue to engage with the industry while it works on a longer-term solution."