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Article Excerpt
Although virtually every person in the United States will purchase or consume a funeral-related product or service, relatively little is understood about the processes a consumer undertakes in making these expensive decisions in stressful circumstances. Regulation of the industry has been contentious from the outset, and there have been numerous questions as to regulatory effectiveness. This article outlines and discusses issues related to the death care industry with particular attention to consumer interests.
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Nearly every person in the United States will purchase or consume a funeral-related product or service for themselves or on behalf of someone else. There were approximately 2.4 million deaths in 2003 in the United States, and by 2040, it is projected that this number will nearly double as members of the Baby Boom generation begin to die (National Center for Health Statistics 2006). Funerals are among the most expensive purchases many consumers will ever make (Federal Trade Commission [FTC] 2000a). Most often, a consumer goes through the decision making for this complex, expensive process once, so that there is little experience, and often few sources of information are used (FTC 2000a). Those making funeral decisions may be under time pressure and significant emotional duress, so that they may be considered vulnerable (Gentry et al. 1995). As a result of this, the funeral industry is regulated at the state and federal levels.
The purpose of this article is to present a review of consumer protection and regulatory issues related to the death care industry. First, we provide a brief description of the products and services that have come to compose the "death care industry." In part because of changes in consumer preferences and in part because of regulation, there are more choices available to consumers. At the same time, this diversification of the industry has led to its own set of problems, including disparities in regulation and enforcement. Next, we discuss the development of the industry in the United States, including the emergence of consumer activism and government regulation. Although funeral homes were not regulated at the federal level until 1984, the consumer issues of cost and the need for consumer protection have been recognized since the birth of the industry. We then discuss the specifics of federal regulation and the challenges of its implementation. Finally, we provide a discussion of consumer issues and offer insight from consumer research literatures that might help in examining the effectiveness of regulation as well as provide direction for research. Evaluative research that attempts to determine the extent to which the impact of the death care regulation has had on consumers would be instrumental in providing additional direction for policy.
BACKGROUND
The death care industry generates over $25 billion in sales annually (Mooney 2002). There are about 22,000 businesses in the United States that perform funeral services (U.S. Census Bureau 2004). The average cost of a funeral is over $8,500 (National Funeral Directors Association [NFDA] 2005), although funeral and burial costs combined may reach $10,000 (AARP 2004). Consumer preferences, competition, and technology have continued to drive changes in this industry.
To better understand the consumer protection issues surrounding the death care industry, it is useful first to define what composes the "industry." The death care industry can be divided into five primary components (General Accounting Office [GAO] 2003): (1) funeral homes, (2) crematories, (3) cemeteries, (4) preneed sales of funeral plans, and (5) third-party sales of funeral goods. What has historically been a fragmented group of discrete product or service providers has ultimately become a group of businesses that often compete with one another by offering the same products or services but operate under different sets of regulations at the state and federal levels.
Funeral Homes
There are approximately 16,000 funeral homes in the United States, which generate over $11 billion in revenue (U.S. Census Bureau 2004). Eighty-nine percent of these funeral homes are owned by individuals, families, or closely held private corporations, averaging sixty-six years in business. The remaining 11% of funeral homes is owned by one of five publicly held corporations (NFDA 2005). Approximately three-quarters of deaths in 2001 were casketed and had some form of ritual or ceremony (Casket & Funeral Supply Association 2005).
Several trends currently affect this portion of the death care industry. There have been changes in consumers' beliefs as to what is considered a "traditional" funeral. Consumers have begun to request more personalized services, so that funeral homes offer a greater variety of secondary services, including "aftercare" services and support groups, community referrals, and libraries. Additionally, many states have increased the educational requirements to acquire and retain a funeral director's license (NFDA 2005).
Crematories
A growing number of Americans are opting for cremation as a method of disposition, although enthusiasm for the practice is not new (The Modern Cremation Movement 1912). According to the Cremation Association of North America, there are over 1,800 crematories in the United States. Cremation was used in about 31% of deaths in 2004, and it is projected that over 50% will use cremation by 2025 (Cremation Association of North America 2006). Use of cremation varies widely with geography, ranging from over 67% in Hawaii to less than 10% in Alabama and Mississippi (Cremation Association of North America 2006).
Responses to a benchmark national survey conducted in 1999 suggested that Americans are choosing cremations because they are less expensive, use less land (environmental considerations), are simpler, and are convenient (Wirthlin Group 1999). Cremation has also been subject to recent changes in consumer preferences for alternative funerals and memorials. Cremated remains can be incorporated into underwater "reef" memorials, turned into fireworks, shot into space, turned into diamonds, or enclosed in keepsake jewelry.
Cemeteries
There are approximately 115,000 cemeteries in the United States (Roane 2002), consisting of four basic types (Cochrane 2002):
(1) National: usually for military veterans and direct family.
(2) Public: municipally owned and operated.
(3) Religious: nonprofit which are exclusive to a religion.
(4) Commercial: owned and operated as a business for profit.
The prices for graves can vary substantially depending on location. Normally, graves in urban centers are more expensive than those in rural centers. In recent years, many cemeteries have transformed from selling only burial plots to providing more services, thus competing directly with traditional funeral homes (Selected Independent Funeral Homes 2005). Until recently, the majority of cemeteries were owned by nonprofit groups such as churches and municipalities, but many cemeteries are now being purchased by for-profit corporations (Carlson 1998). Cemeteries are regulated exclusively at the state level.
Preneed Sales of Funeral Plans
The preneed, or prearranging, concept originated with burial organizations in the 1930s. There is a distinct difference between "preplanning," which involves the consumer's decision making regarding the specifics of a funeral, and "prepurchase," or "preneed" agreements, the proceeds of which are used toward funeral and other expenses. Funeral industry proponents tend to emphasize that prepurchase is helpful since there is then money dedicated toward funeral expenses (NFDA 2005). Consumer advocates discourage prepurchase, and instead encourage preplanning, which allows people to decide in advance what type of funeral they will have but pay at the time of death (Fleck 2002; Funeral Consumers Alliance 2005). Preneed agreements are likely to include a package for funeral and burial goods and services and may be sold by funeral directors and cemeterians. Consumers have purchased in advance an estimated $25 billion in funeral goods and services through funeral homes or insurance companies (Hermanson 2000).
In most states, only licensed funeral home directors and cemeteries are allowed to sell preneed contracts, but some states allow for the sale of preneed agreements by third-party sellers, as long as they obtain a permit or license (AARP 1999).
Third-Party Sales of Funeral Goods
Third-party vendors are neither funeral homes nor cemeteries, and usually sell a very narrow line of funeral merchandise, including caskets or urns. Third-party sellers purport to offer lower prices than traditional funeral homes for individual products and perhaps because of this, have become a growing segment of the death care industry (FTC 2002c). It is estimated that 25% of U.S. families are expected to use a third party to purchase funeral products for a loved one by 2020 (Rybarski 2004). Because third-party vendors are not "traditional" sellers of funeral products, they may not fall under either state or federal death care regulation domains.
All of these industry segments have come into being in the United States over roughly the past two centuries. Although different death cares practices were brought to the United States from different countries and cultures (Mandelbaum 1976; Moore and Bryant 2003), consumer protection efforts have come to focus primarily on a fairly mainstream ritual for disposition of the dead. To fully understand the dynamics of the death care industry, and the consumer and regulatory issues that surround it, it is useful to examine its history.
EMERGENCE OF THE DEATH CARE INDUSTRY...
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