Preneed Market Trends—Reflecting on the 2022 Life Insurance Council’s LIC Preneed Forum

By James Palm

NewsDirect, August 2023

Each year, the Life Insurance Council, part of LOMA, conducts their Annual Preneed Forum. The conference is intended to address a wide range of preneed issues including actuarial, legal, marketing, branding, and customer service. Membership is comprised largely of small to mid-sized preneed funeral insurance carriers who seek to glean from each other industry best practices, address mutual challenges, and discuss recognizable trends in the preneed space. Every year, the council facilitates from the members an opportunity for a couple of them to showcase what they feel are some of their processes, challenges, or strategies that all the members may take away some key points from and implement them into their own companies.

The 2022 LIC Preneed Conference was held in Des Moines, Iowa. One of the keynote presenters was from a newly formed preneed insurance company who shared their strategy for achieving acquisitional growth. By and large, market share increases in the preneed space are derived through organic growth strategies, i.e., acquiring new agents who oftentimes are funeral directors and owner operators that hold insurance licenses to sell preneed.

In this presentation, it was revealed how years ago, there were some funeral home operators who created their own preneed insurance companies in an effort to maximize their returns for their preneed clients, who they ultimately would provide funeral services for, theorizing this option would outpace bank rate performance and provide that essential inflation hedge against increased funeral costs.

Today, many of these insurance company/funeral home owners are reaching retirement age and it seems to provide an opportunity to acquire for a fair price, that independent company. They elaborated how part of the buy-sell contains agreement for the carrying on of that funeral home’s preneed business thus gaining market share, and the merging of smaller, closely held preneed companies, making the sum of the whole much larger, secure, and asset rich.

Another part of the conference included some analyst foresight into the trends of the industry overall, and much discussion during the forum as well as in the off-hours took place. It is widely recognized that with the baby-boomer demographic reaching retirement age, attitudes toward death, funerals, memorialization, and disposition are vastly changing. Historically, one could assume most individuals selected traditional burials and religious rites as part of their advance plans. Today, according to the National Funeral Directors Association, in their latest 2021 Cremation and Burial Report, cremation has become the preferred mode of disposition with the current nationwide statistic accounting for 57.5% of all deaths. Projections continue to bear out this method is increasing nationally by about 1.5% per year and by 2040 expectations are the rate will exceed 78% of all deaths.

Coupled with this interest in a simplified form of disposition over traditional burial, 60% of surveyed consumers expressed at least a curiosity of forms of environmentally responsible disposition.

All these changing trends in the type of disposition also has an impact on the overall ritualization and memorialization that surrounds such an event. Historically again, most funerals took place in churches, synagogues, gravesites, and the like. With the ever-increasing move to cremation, the ways in which one chooses to be remembered also has evolved. People have come to recognize there are many more alternatives than in the past, leading to more self-directed options. Ranging from simple family gatherings at a memorial garden or cemetery, to lavish get-togethers at a favorite locale..

To this end, funding in advance has become a topic in preneed circles like the Preneed Forum. The funeral industry has become negatively impacted in many ways revenue-wise due to the trends already mentioned. The public has begun to regard the funeral provider in some of these instances, as nothing more than the disposition provider. Among these consumers who choose to self-direct many of the other details surrounding a death, there still are expenses to go along with those choices. The purpose and function of preneed insurance has over the years been intertwined with funeral home delivered services and merchandise. Now, with the DIY consumer, the need for funding changes in that the funeral provider may be connected only with the disposition aspect, but the remaining expenses related to the rest of the event is borne by the heirs.

This is where Final Expense insurance can play more of a role. Final Expense will pay whoever incurs related expenses for the disposition and memorialization of a loved one. No longer will these arrangements and payouts be to a single source, but rather there is the potential for many additional parties involved in the various aspects with this kind of choice.

Marketing of insurance products to consumers in the deathcare industry therefore, is seeing a shift. Insurance carriers who specialize in these products will be well-served to follow the consumer and keep informed of their attitudes toward death and preferences for memorialization.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

James Palm is a national sales director of preneed at ELCO Mutual Life & Annuity company. He can be contacted at james.palm@elcomutual.com.