Thursday, October 7, 2021
Victoria J. Haneman (Creighton; Google Scholar), Prepaid Death, 59 Harv. J. on Legis. ___ (2022):
The cost of an adult funeral exceeds $9,000. Funerals are expensive and death is not considered an appropriate time to bargain shop. The consumer is generally inexpert and vulnerable due to bereavement. Decisions are often time-pressured and perceived as irreversibly final. Accordingly, the death care industry benefits both from information asymmetry and etiquette uncertainty. Protecting the bereaved consumer calls for reversing the current norm of at-need (after death) purchasing in favor of pre-need (before death) planning and prepayment. Due to excessive influence of the industry over its state regulators, referred to as regulatory capture, current pre-need prepayment instruments are so deeply flawed that conventional wisdom recommends against prepayment.
This Article borrows from nudge theory to shape an intervention that will correct unfairness and inefficiency in an imperfect market, in a way that deftly sidesteps an all-out attack on the industry itself. The proposed paradigm shapes an incentive that allows the consumer to pay for pre-need death care service with pre-tax earnings through Internal Revenue Code Section 125 and flexible spending account principles. Untangling regulatory capture becomes unnecessary: federal tax-sheltering of pre-need prepayment dollars will generate consumer demand for reliable and qualified pre-need prepayment financial instruments. This increased demand for pre-need instruments will, in turn, provide an incentive for funeral providers to offer the attractive terms necessary to compete for this new base.