Providers of pre-paid funeral plans will be subject to new high standards of regulation and supervision by the Financial Conduct Authority (FCA) as of July 29.
The FCA said it has authorised 26 providers who together hold around 1.6mln plans, representing 87% of the market.
It said regulation of the sector would lead to higher standards and better consumer protection.
As of today, cold calling is prohibited, commissions paid to intermediaries, such as funeral directors, are banned, and funeral plans must deliver a funeral unless the customer dies within two years of taking out the plan, in which case there will be a full refund.
In the event that an authorised provider fails, customers also will now have access to the Financial Services Compensation Scheme (FSCS).
Even if the issue occurred before July 2022, consumers can complain to the Financial Ombudsman Service (FOS) if the firm was registered with the Funeral Planning Authority (FPA) at the time.
According to the FCA, 13 firms that applied before 1 March 1 2022, but have not been authorised, have until October 31, 2022 to transfer their plans to authorised firms or refund their customers.
Until they are transferred to authorised providers, these plans are not covered by FCA regulation, so they are not protected by FOS or FSCS.
"With our new rules in place, consumers will be better protected when they need it the most," Emily Shepperd, executive director of authorisations at the FCA said in a statement.
"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."