For many older consumers a funeral is their third-largest expense, behind the purchase of a home and an automobile. According to the National Funeral Director’s Association, the median cost of a traditional funeral is $7,181 (not including cemetery charges such as vaults, monuments, or florists).
The deathcare industry is undergoing change as it consolidates. Distinctions between funeral directors, who traditionally sold funeral goods and services, and cemetarians, who handled goods and services for burials, continue to blur. More third-party vendors (neither funeral directors nor cemeterians) and crematories are providing goods, such as caskets and headstones, and services.
There is growing interest in cremation and environmentally friendly burials (i.e., without such traditional items as steel caskets, formaldehyde embalming, and vaults). The Cremation Association of North America states that 49 percent of deaths resulted in cremation in 2015, which is a slight increase from 47 percent in 2014. This is up from 26 percent in 2000 and 6 percent in 1975. The Green Burial Council has established the deathcare industry’s first certification program. It helps consumers find professional providers and assists conservation groups in developing burial grounds that protect natural areas and further their long-term stewardship objectives.
Industry consolidation—commercial chains now own many funeral homes. Consumers may not be aware of this, since a chain may purchase an independent home yet continue to advertise under the name of the local business. When the second-largest funeral home chain declared bankruptcy, many consumers with preneed contracts did not realize that their funeral home was owned by the bankrupt chain.
Large chains are extremely active in marketing preneed agreements to purchase funeral and burial goods and services prior to death; industry estimates suggest that more than $25 billion were tied up in preneed agreements in 1999, up from $18 billion in 1995. Fraud, bankruptcy, and violation of fiduciary responsibility place these contracts at risk. AARP and other consumer organizations encourage preplanning funeral arrangements but urge caution when paying through a preneed contract or other formal arrangement.
Industry regulation—some funeral, cremation, and burial providers bill service and finance charges that are unconscionably high and anticompetitive. Intercity and interstate burials, which usually involve two funeral providers, prompt many complaints about excessive charges. Standardized price information, which would allow comparisons among funeral providers in a selected area, is not widely available to the public. The FTC has reacted to concerns about lessened competition. Specifically, in 2006, Service Corporation International’s (SCI) proposed acquisition of Alderwoods Group Inc. resulted in a settlement under which the FTC required SCI to sell some of its funeral homes and end its licensing agreements with third-party funeral home affiliates.
The key federal rule governing the deathcare industry is the Funeral Rule, adopted by the FTC in 1984, which governs disclosure of price information by funeral directors.
The rule applies only to businesses that provide both funeral goods and services. Businesses that provide only one type of service (e.g., cemeteries, crematories, and third-party sellers) are exempt. Also, the rule does not cover direct purchases of burial goods from third-party sellers, such as online merchants and storefront casket vendors. The FTC’s practice of allowing violators to make voluntary payments to the Treasury Department—in lieu of fines, other types of enforcement actions, or public disclosure of violations—weakens the rule’s deterrent effect. In 1994 the FTC announced a continuation and expansion of the rule, adding a ban against third-party casket-handling fees.
State regulation of the deathcare industry varies, with enforcement responsibilities spread among state agencies, commissions, and boards. A Government Accounting Office study identified 29 states that have multiple organizations responsible for regulating all or most of the five deathcare industry segments (funeral homes, crematories, cemeteries, sellers of preneed plans, and third-party sellers). These agencies’ powers and authorities vary greatly. The regulation of preneed contracts in such areas as vendor licenses, funds held in trust, contract provisions, and consumer protection (or guarantee) funds also varies widely among states in scope, approach, and requirements.
Deathcare Industry: Policy
Strengthening the Federal Trade Commission (FTC) Funeral Rule
The current protections in the FTC Funeral Rule should be retained, and the rule should be expanded to cover cemeteries, crematories, and third-party sellers.
The rule should require standardized formats for price lists and contracts for funeral and burial goods and services.
The rule should require that all price lists and contracts include information on how to file complaints (including the name and phone number of the agency to contact).
The FTC should continue to monitor compliance with its Funeral Rule and should investigate other aspects of the industry, including the costs and charges for transporting bodies, fraud and abuse in cemetery sales, tie-in arrangements, the effects on competition and prices of major funeral and burial chains, and cremation practices.
Violators of the Funeral Rule should not be offered an option to make a voluntary payment and retain anonymity under the Funeral Rule Offenders Program.
States should adopt the FTC Funeral Rule to strengthen their ability to enforce it.
Prepaid funeral contracts
The FTC should adopt minimum standards for preneed funeral contracts.
States should regulate and require portable, written contracts for all preneed funeral and burial arrangements.
All preneed contracts should be written in plain language and large type; the contract’s material provisions should be prominently disclosed.
All rights, duties, and obligations of the preneed provider and the consumer should be disclosed in the contract. These include:
- itemization of goods and services purchased;
- cancellation, modification, and revocation procedures;
- funding mechanisms;
- handling of escrowed funds;
- fees related to the transaction;
- whether the contract is guaranteed or nonguaranteed; and
- distribution requirements.
Funeral establishments should be required to present to the person handling the arrangements for the deceased a copy of any preneed agreement that is in the possession of the establishments.
Ensuring availability of funds under preneed contracts
States should protect consumers from misappropriation of preneed funeral and cemetery funds and ensure consumer restitution.
Insurance-funded preneed contracts and trust arrangements should be state regulated. States should give the purchasers of preneed contracts a statutory lien so that consumers have priority over unsecured creditors with claims against the seller.
States should establish guarantee funds to provide a source of recovery for preneed consumers who are harmed by a seller’s or provider’s theft, fraud, or bankruptcy.
Independent audit reports of all trust funds should be submitted regularly to the state enforcement agency.
States should apply sound actuarial principles to ensure that consumers’ preneed funds will be available to purchase the funeral and burial goods and services selected.
- prohibit abusive, deceptive, and unfair practices in the sale and maintenance of burial spaces and other goods and services, as well as in the disposition of remains;
- require registration of all preneed providers;
- prohibit the addition of finance charges and interest on installment contracts for preneed goods and services unless they are delivered to the consumer;
- prohibit the direct or indirect solicitation of consumers in hospitals, retirement facilities, nursing homes, group homes, or health care facilities without having been expressly requested to do so by these consumers or their representatives; and
- require that advertisements for funeral and burial services disclose the ownership of the entity offering the service.
State regulatory practices and enforcement
- encourage efforts to coordinate the regulations of the various state departments that oversee funerals, crematories, cemeteries, third-party sellers, and preneed goods;
- establish a single, toll-free number that consumers can call when they incur problems with any deathcare provider;
- provide adequate authority and funding for a state enforcement agency to perform periodic field audits and investigate complaints;
- establish civil remedies and criminal penalties for unfair, deceptive, and fraudulent practices by preneed providers; and
- enact laws on preneed funeral and burial contracts to ensure a level playing field between consumers and sellers.
Cemeteries should be required to:
- establish escrow accounts designed to ensure that income will always be available for the continued upkeep and maintenance of the cemetery; and
- offer burial land on equal terms, including price, to all consumers, including preneed and at-need purchasers and consumers who select a third party (other than the cemetery) to provide goods and services, including grave markers and funeral services.
States should establish standards for natural burial grounds that encourage environmentally sustainable and ethical practices.
Natural burial grounds should use only plants and vegetation native to the land and prohibit toxic chemicals, vaults, and other items that harm the natural surroundings.
Natural burial grounds should have criteria for visitation rights that allow adequate visitation while protecting the environment.
States should establish enforcement measures for cemeteries that purport to be natural burial grounds but do not adhere to established ecological standards.
Irrevocable contracts should be available only for buyers who seek to meet eligibility tests for public benefit programs.