Debt and Death

Now that the holiday season is over and we have entered the new year, it might seem incongruous that the theme of this article is death. Ok, it is not exactly the grim reaper rearing it's ugly head, it is the concern of 'debt and death' or more to the point, the amount of money owed to the funeral industry that is of interest.

Much has been written on this topic from the point of view of the clients, the financial difficulties of the bereaved parties. This article however, is going to be about the effect of debt on the funeral industry itself and more specifically the independent funeral director.

Aggregate spending on funerals in the UK was said to be £2.8bn. in 2014, with around 75% of that spent with over 4000 independent funeral directors, conducting around 600,000 funerals across the UK every year. The cost of funerals has risen by 80% over the last ten years and on top of that, with an ageing ‘baby boomer’ generation, deaths in the UK are set to rise by 20%. It is also said that by 2020, the cost of a simple funeral will be on average, £7000.

So you would think that everything would be rosy within the funeral industry, rising demand and rising prices must signify rising profits. However this is not so with an increased number of independent funeral directors suffering financial difficulties due to unpaid debt. This is said to be running at up to 40% and with the increased costs of funerals, death certificates, churches, crematoria and cemeteries, this has caused the independents to either ‘sell out’ to a bigger firm or go into insolvency.

Historically funeral directors have found it difficult to discuss costs with the bereaved, who themselves have found it difficult to be realistic about what they can actually afford. Like marriage, the funeral is seen to be a matter of family pride, money is no object, until it comes time to pay the bill.

There is an anarchic business concept called ‘The Prostitute Principle’ which states ‘that the desire to pay for a service diminishes significantly after the service itself has been rendered’. Having said that, most funeral directors, although they take a deposit, still charge most of their fees by invoice after the funeral takes place.

A funeral service has been recognised as the important first stage towards acceptance and healing. Although seen as a public service, and many funeral directors see themselves as such, they are primarily a business that is out to make a profit. They offer a service and have the right to be paid in a timely manner for that service. If grief becomes regarded as an easy way to delay or avoid payment, then it is not only the industry that suffers, but also the community as a whole as costs will continue to rise as debt increases.

It is not always the fault of the bereaved, there is also the matter of delayed payment by solicitors are holding onto funds specifically earmarked for funeral costs, but who do not release them quickly enough to pay the funeral director. This causes problems for both the funeral director and the family, who are not responsible for the delay.

So how is this all going to be resolved?

First funeral debt has to be reduced to help relieve to pressure on rising costs, and secondly, better business practises have to be put into place by the funeral industry, to help the bereaved understand the costs before the funeral takes place and identify those unable to pay.

Many independent funeral directors now use third party specialists to assist with their debt liability. Using a third party helps with collecting ‘sensitive debt’ in a professional and understanding manner. It also distances the funeral director from the client allowing for continued business in the future.

Updating the funeral director’s terms and conditions to allow for ‘third party’ collection, benefits all parties as no costs have to be built into the price upfront to allow for future, possible debt collection.

Help can also be offered in credit checking potential clients before taking on new business, so that again future liabilities can be avoided.

It looks like that solving the problems of debt within the funeral industry would not only help save those businesses but also help reduce costs and benefit the community as a whole.

By Kevin Bishop - Senior Partner at Town and Country Legal Services LLP