As insurance becomes an increasingly popular method for clients to fund their eventual funerals, policy-makers in some provinces are re-evaluating the rules associated with the distribution of funeral insurance products.
In one province, this means stricter rules for financial advisors selling these products; in another, it may mean new competition in the distribution of funeral insurance, as regulators strive to balance sufficient availability of the products with appropriate consumer protection.
"It's kind of that balance between providing for a fairly open market for [clients]," says Greg Pollock, president and CEO of Toronto-based Advocis, "while, at the same time, trying to ensure good standards and suitability with respect to the sale of product."
In Ontario, the provincial government is taking steps to restrict the marketing of funeral insurance products. In July 2012, the government introduced amendments to the Insurance Act to prohibit life insurance agents from contacting a person, either by telephone or in person, to sell funeral insurance unless the person has asked the agent to contact him or her for that purpose.
Advisors also are prohibited from contacting, by any means, any person who is in a hospital, long-term care home or hospice to sell funeral insurance unless the person has asked the agent to contact him or her for that purpose.
These changes parallel new rules pertaining to individuals licensed under the provincial Funeral, Burial and Cremation Services Act. Funeral insurance can be purchased through either a licensed insurance advisor or in a funeral home in Ontario - as well as in most Canadian provinces.
The new rules affect any advisors who sell "final expenses" insurance policies - life insurance policies whose proceeds are intended to be used for funeral services.
"It's any insurance that's being sold for the purposes of purchasing these services," says Izabel Scovino, senior manager, insurance and deposit institutions policy, with the Financial Services Commission of Ontario (FSCO) in Toronto.
The restrictions pertain to contact with both existing and prospective clients, Scovino adds: "Presumably, it's anyone whom they're trying to sell this insurance to."
Pollock considers this aspect of the new rule unusually strict: "It is fairly restrictive."
Jack Bendahan, a senior life insurance advisor with LifeMan.ca in Markham, Ont., suspects that the new rules may have been introduced in response to some brokers engaging in aggressive sales practices: "Maybe they're preying on people in long-term care facilities, or people who are sick."
Most of Bendahan's business is generated from individuals contacting him to request a quote or information. Thus, he doesn't expect the new rules to affect his sales practices.
Advisors in Ontario now also are required to inform prospective purchasers of funeral insurance in writing that purchasing such insurance is not the purchase of funeral services. This is an attempt to avoid any potential confusion about the nature of the product.
"That's to ensure that the person who purchases the insurance understands that what they're purchasing is a life insurance product," Scovino says, "and they have not actually purchased a pre-arranged funeral-service package."
Meanwhile, in Nova Scotia, the provincial government has proposed to broaden the availability of funeral insurance by allowing it to be sold in funeral homes as part of a broader review of funeral-sector legislation.
Clients planning ahead for the costs associated with a funeral currently have two options: they can prepay the full amount directly to a funeral home, which then holds the funds in trust; or, clients can purchase an insurance policy, with the proceeds to be used for funeral expenses.