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Death of Preneed?
March 5, 2009In Victoria, BC for a ten years period from 1996to 2006, I was the manager andsales person of alarge pre-need program.There are some benefits and some disadvantagesfrom 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 moreof an option. Although Victoria has higher cremation rates and lower averages, it does havean 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 tothe ownership on what is happening in the future. If I was to provide proper advice it would bedirectly 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-needContract
As I have mentioned previously, merchandise is declining and receptions and catering areincreasing. The problem is that when you are making pre-arrangements with that 75 year oldwidow 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 challengeto just convince here and suggest that she have a service for her family let alone set aside $1000or $2000 for a reception.That is a real problem and it is probably not affecting your market, not yet anyway. By keepingwith that old equation of service plus merchandise plus disbursements equals the total of thecontract, you may be shooting yourselves in the foot because you are not allowing for thatincrease 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 finalexpense 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. Thefinal expense lump sum can include a lot of things and have flexibility in assigning where thosedollars go.
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