I’m a licensed health and life insurance agent.  I received my license and started a Preneed Funeral insurance agency back when Minnesota first allowed funeral directors to do so in the 1990’s.  It was a boon to our business as we could now write Preneed policies and receive a commission on them.  Our funeral home evolved into a business that had two full-time preneed agents and two part-time, funeral director/agents, including me.

Up until this time, Minnesota had only allowed non-funeral directors and non-funeral home employees to become Preneed agents and funeral homes had to either call those people to set up accounts or place the preneed monies in an interest-bearing bank account of which no commission was paid.  The commissions allowed us to hire staff for such and to have revenue come in for the marketing of preneed.

As always, I was concerned about the insurance companies that we choose to partner with in offering the preneed plans.  I’d lived through the Michael Milken greed of Wall Street days when some highly thought of companies collapsed with virtually no warning because of their (many times illegal) investment decisions.  As a matter of fact, I had a relative with one of those life insurance accounts who was not allowed, through regulatory actions, to access any cash value — the death benefits would be available at death, but because of the upside-down nature of the company’s finances cash was needed to grow and build up future obligations.  By the way, that relative eventually died and his family did receive the promised death benefit.

So, I was always worried about the companies that I was presenting to my funeral home clientele for preneed policies.  It’s important to know their financial strength if you are telling consumers to put their funeral savings into those policies.  However, unless you are a CPA, the financials and the money held in reserve for future claims are hard to understand and value.

I finally took the position that the State of Minnesota Insurance Department had to okay any company in the insurance field to operate in Minnesota.  I realized that the regulators were not going to let an under-capitalized company take Minnesota consumers money and put it in jeopardy.  And, the State of Minnesota insurers had their own re-insurance pool of money just in case some company took a downward financial hit.  The limit on that pool was $300,000 in death benefit per policy and, of course, all of our funeral policies were well under that limit, so my mind was at ease.

I thought of that today when I heard a report from a life insurance company that, as this article mentions, Americans between the ages of 18-64, have had death claims jump 40% during the Covid-19 pandemic.  According to the article, J. Scott Davison, CEO of insurance company OneAmerica, said, “that his company is seeing the highest death rates now than he’s ever seen before since he started in the insurance business. . . . Death rates (for the 18-64 age group) are up 40 percent over what they were pre-pandemic.” 

It should be noted that Davison’s company, OneAmerica, offers employers across the country group life insurance and most policy holders are in that 18-64 age bracket and still working.

In this related article from Reuters, they mention that Global death claims for the first nine-months of 2021 were about $5.5 billion as compared to the entire amount for 2020 of $3.5 billion.  Hanover Re board member Klaus Miller was quoted as saying this, “We definitely paid out more than I had anticipated at the beginning of last year.”

The Reuters article also made this comment, “The long-term nature of life insurance products – often lasting 20 years or more – means premiums are not yet capturing the risk that deaths or long-term illness from COVID-19 will likely remain higher than previously estimated. Competition in the industry is also keeping a lid on premiums.”

Funeral Director Daily take:  We’re fortunate in the death care business to have such solid preneed companies insuring the deaths of our preneed policy holders.  Over the years we’ve had a couple of problems in the funeral business with preneed policies, but they have been because of criminal elements and not the companies per se.  However, the criminals that steal the premiums or insurance company resources can cause a lot of trouble for all of us.

My advice is to be diligent and know the company(s) you  are dealing with.  It might also help to know your State Insurance Regulator’s ratings on companies and also what is the State’s default position in case of some problem.

More news in the world of Death Care:

• Hawaii has the highest life expectancy, Mississippi the lowest.  Where does your state rank?  USA Today

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