It is interesting for me to speculate on what is happening in the Pre-Need insurance market. While I have access to some statistics – it is by all means when considering the national perspective – a small sampling size. However, I do see a couple of things trending that I would indicate that the Pre-Need death care market could be up for some challenges.
The first thing that I have noticed – and it doesn’t take a genius to understand why this would happen – seems to be that people who do pre-arrange and pre-finance their funerals are doing so at less dollar amounts than before. My guess is that this is a result of pre-arranging and pre-financing cremation services over doing the same for full service funerals. It is a pretty simple thought — in my market of Minneapolis we see the competition for direct cremation services advertised for as little as $1295 in the daily newspaper. A full service funeral in the market would go for $10,000 and upwards so if you are pre-arranging cremation, you are doing so with a lot less dollars.
The second – and not so obvious – trend that I have noticed is that I think a smaller percentage of the population is pre-arranging their funerals than the group in the preceding 20 years. Just today I received the report of Security National Financial Corporation’s 3rd quarter results. You can see their press release here. In what they call their “Cemetery and Mortuary” business (i.e. pre-need) they state that the segment “continues to see a 7 to 8% decrease in case counts versus 2016”. The trend that I see is that consumers who now have IRA’s or 401k’s feel more confident about the ability to pay for death care expenses from their personal savings in contrast to pre-need funds (especially if they are as low as direct cremations of $1295-2000) as compared to the group over the last 10-20 years who received income via company pensions and, in addition, set up pre-need funds for their death care expenses.
Security National Financial states that “our sales force has worked hard to make up for the revenue decline attributable to the decreased case counts by increasing pre-need sales.” I take that statement as saying that they are trying to increase the average amount of the pre-need account. i.e. higher insurance face values.
If I am correct in that assumption, the ironic thing about it is that they will be trying to increase face values into the strong headwinds of lower cost funerals (i.e. cremations). I find that may be very different to do.
So, it appears that if these assumptions are correct, then we will have less policies and they will be at less face value on average. Those are not great trends to buck up against and you can look for every thing from pre-need agents to agencies, to pre-need insurance companies to consolidate in order to save costs against the lowering revenue trend. This is something I seeing coming in the not so distant future.