In Victoria, BC for a ten years period from 1996 to 2006, I was the manager and sales person of a large pre-need program.
There are some benefits and some disadvantages from being in a retirement area such as Victoria. There is a high cremation as I have mentioned before and part of the reason Victoria does is because they are always getting new, transient people coming here to retire. They don’t have that plot history here so cremation seems to be more of an option. Although Victoria has higher cremation rates and lower averages, it does have an influx of new people.
I had to work hard on pre-need. A pre-need rep had to make 200 to 300 pre-arrangements per year but those contracts were below national averages due to a very high cremation rate.
The reason why I resigned from that position was that part of my role was to provide advice to the ownership on what is happening in the future. If I was to provide proper advice it would be directly counter intuitive to how I was compensated.
What was happening?
There was a bit of a flaw that I could see happening in this equation in pre-need:
Funeral service + Casket + Disbursements = Pre-need Contract
As I have mentioned previously, merchandise is declining and receptions and catering are increasing. The problem is that when you are making pre-arrangements with that 75 year old widow that thinks she is going to live to 100 and thinks she is going to outlive all her friends. She says,
“There is not going to be anyone there to have a service anyway!” It is a tough enough challenge to just convince here and suggest that she have a service for her family let alone set aside $1000 or $2000 for a reception.
That is a real problem and it is probably not affecting your market, not yet anyway. By keeping with that old equation of service plus merchandise plus disbursements equals the total of the contract, you may be shooting yourselves in the foot because you are not allowing for that increase in receptions and in the catering revenues.
It might be time to look at other funding opportunities and almost taking your pre-need to a final expense approach, and going from the insurance approach and to saying the overall “End-Of-Life” costs are in $10,000 to $15,000 range, not just focusing on the $6,500 funeral value. The final expense lump sum can include a lot of things and have flexibility in assigning where those dollars go.
What is also going to come out of that is that you are probably also going to let go of the guarantee. This is especially in the rates that you are getting from our trust companies or insurance providers. Letting go of the guarantee may not be so much of a bad thing. In my ten years of experience, what really got people to prearrange was not the locking in of the prices. That might have been secondary. More importantly it was the peace of mind knowing that they had everything looked after for their families.
Pre-need is changing and to survive we are going to have to adjust that pre-need equation.
Watch what happens out here so that you aren’t blind-sided when it happens to you.
My Challenge to Pre-need Companies: Provide a new funding vehicle that isn’t based on the old “Equation” plus, of course it also has to have good growth, good commissions, and most importantly – secure.
Pre-need as we know it may not be dead yet, but it looks like it could be terminal.
Pre-need definitely lived life in the fast lane and it was one wild ride!
Do you think that pre-need is going in this direction? I would love to hear your thoughts – please leave a comment below…