The current global supply crisis, due to the lack of raw materials, comes on the heels of the coronavirus pandemic and its dire economic consequences. The situation has created a climate of uncertainty among entrepreneurs and investors, including those in the funeral industry. Should immediate burials or traditional services be promoted? Will funeral plans increase in the future? How will funeral insurance evolve? Don’t worry. Here we bring you the keys to making strategic decisions in your funeral home thanks to this complete analysis of the industry depending on the different types of funerals and contract modalities according to data from Maia Research.
Evolution of the funeral industry
The global funeral industry recorded $60,279.6 million in revenue in 2015. The economic growth recorded globally also impacted on the funeral home market, which over the last five years has recorded a 17.45% increase in revenue, reaching $70,800.3 million. This represents an increase of $3,288 million over the previous year.
Impact of Covid-19
The coronavirus pandemic has radically changed expectations in the evolution of the funeral industry. Excess mortality has led to an unexpected increase in costs for funeral homes, which have had to give up part of their revenues. Traditional funeral home services (prohibited by health regulations) have also been discontinued in favour of immediate burials.
For this reason, a few months before the end of 2021, the Maia Research report predicts that the total value of the funeral home market will be 69,681.6 million dollars, i.e. 1.6% less than last year’s turnover. However, estimates are optimistic that the recovery will be rapid. By 2022, the market value recorded in 2020 will recover (and even increase) to USD 71,326.1 million. This trend, the analysis says, will continue over the next five years, with a 9.63% growth compared to 2020. But what types of funerals will lead demand?
Analysis of the industry by types of funerals
The majority of the industry’s funeral industry revenues are derived from traditional funeral service types as opposed to memorials or immediate burial.
The analysis of the industry by types of funerals reveals that 58.64% ($41,524.4 million) of total revenues currently come from traditional services, i.e. those funeral services that include viewing, embalming and dressing of the body, casket, cemetery plot, hearse to transport the body to the funeral site and cemetery, and burial or cremation of the remains.
Immediate burial (known in some countries as direct cremation or low-cost service) accounts for 24.6% ($17,409.8 million) of revenues while memorial services to honour and remember the deceased after the body has been cremated or buried account for 16.76% ($11,866.1 million) of revenues.
Immediate burials are gaining ground
These percentages have hardly changed over the last five years. There has been a slight increase in revenue from immediate burials compared to a small decrease in revenue from traditional types of funerals and memorials. Although these changes are barely half a point, there is what appears to be a trend towards an increase in low-cost services.
We could attribute this variation to a one-off situation caused by the coronavirus and the restrictions resulting from the pandemic. However, it is a very slow change, but one that is here to stay according to the Maia Research report, which forecasts that by 2025, traditional services will account for 58.28% (-0.36% compared to 2020); immediate burials will continue to rise to 25.1% (+0.7%) and memorial services will contribute 16.62% of revenues (-0.14%).
Analysis of the industry by contracting methods
Almost half of the revenues of funeral homes currently come from the types of funerals contracted before death, i.e. pre-need funeral planning or funeral insurance. Specifically, in 2020, a total of $33,757.6m (47.7%) came from pre-need funeral planning services, while $28,389.3m (40.1%) was paid at the time of contracting.
Pre-need funeral planning
A pre-need funeral planning and funeral insurance is where the deceased pays in advance for the costs of their future funeral service. It involves taking steps to make funeral arrangements and bear the cost of the funeral. Several studies by consumer associations have revealed that relatives of the deceased rate this type of insurance highly because it is very convenient.
However, some plans only cover a percentage of the costs. Other customers fear that the total cost of the death is lower than the insurance policies they have been paying for. In fact, given the average price of insurance and life expectancy, the premium payments usually exceed the money insured.
In the case of plans paid directly to funeral homes, many customers are wary of what will happen to their money if the company goes bankrupt or changes ownership. Therefore, written assurances must be given about reimbursements, services to be provided, and arrangements for transferring services to other providers.
Rise of the at-need funeral
Despite the cons, convenience remains the decisive factor tipping the balance in favour of pre-need funeral planning. However, this trend could change in the coming years, according to funeral home plans. In 2015, 48.85% ($29,452.6m) of funeral home revenue came from pre-need funeral planning. That percentage has now dropped by one point and, according to Maia Research’s report, it will continue to slowly decline over the next five years to 46.5%. Meanwhile, at-need funeral types have risen from 39.2% of revenue in 2015, to 40.1% in 2020 and are estimated to reach 41% by 2025.