The prepaid funeral industry is accelerating its transformation to overcome stricter regulations on advance payments. Companies are attempting to pivot to a 'total life care' model as a strategy to navigate government pressures. This includes expanding direct funeral home operations and diversifying revenue streams through services related to travel, weddings, and pet care.
According to industry sources on May 10, the prepaid funeral sector has a unique accounting structure that differs from traditional manufacturing or service industries. Monthly payments made by customers are recorded as 'deferred revenue'—essentially liabilities—until funeral services are actually rendered. As the number of subscribers increases and cash inflow rises, the debt ratio on the books also increases, often leading to perceptions of financial instability.
Additionally, to protect subscriber payments, companies are required to deposit 50% of advance payments into banks or mutual aid associations, effectively tying up half of their funds. Concerns are growing that if the National Assembly and the Fair Trade Commission implement further regulations on advance payment management, the entire prepaid funeral industry could face a severe liquidity crisis.
In response to these structural limitations, companies are expanding into total life care services. Notable examples include conversion services linked to cruise travel, weddings, healthcare, and pet funerals. By allowing subscribers to use their accumulated advance payments for a variety of services beyond just funerals, companies are broadening the utility of their prepaid products. This approach enables consumers to access services during their subscription period, diversifying the revenue model that previously relied solely on advance payments.
The recent aggressive push to build direct funeral home infrastructure is also part of this revenue diversification strategy. Direct funeral homes can generate additional income through services such as catering and funeral supplies, beyond merely providing a venue.
Woojung Free Life secured 15 direct funeral home brands under 'Shilnakwon' last year and has opened a new 'Shilnakwon Seoul Jejung Funeral Home' in Guro-gu, Seoul, enhancing its network in the capital. Kyowon Life opened a funeral home in Chungju this year, expanding its direct funeral home network to eight locations nationwide, with plans to open another location in the second half of the year. Boram Funeral Services has established a stable offline service chain with a total of 13 direct funeral homes across the country.
An industry insider stated, "As regulations on advance payment management tighten, companies that cling solely to traditional funeral services will struggle to survive. Ultimately, only those that can transition to revenue generation through direct funeral infrastructure and lifestyle-oriented new businesses will be able to cross the threshold of survival."
* This article has been translated by AI.
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