The funeral industry in South Korea has grown significantly, with customer deposits reaching 11 trillion won. However, concerns have emerged regarding the management of these funds. While half of the customer money is legally protected, the other half is largely left to the discretion of the companies. Current laws do not impose restrictions on how these funds are managed, nor do they prevent loans to major shareholders, leading to sharp criticism that it is akin to 'entrusting fish to a cat.'
According to the '2026 Fair Trade White Paper' released by the Fair Trade Commission on October 13, there were 126,803 compensation claims from the Korea Funeral Association and the Funeral Guarantee Association between 2021 and 2025, totaling approximately 130.8 billion won. As of March last year, out of 76 prepaid installment service providers, only 31 (40.8%) were members of a guarantee association, holding 3.18 trillion won, or about 30.8% of total customer deposits. These associations are responsible for compensating consumers with 50% of the deposits if a funeral company goes bankrupt or has its registration canceled.
Consumers who have signed up for services from small funeral companies that are either not part of a guarantee association or lack sufficient compensation capacity are at risk of losing their money. As of the first quarter of this year, 36 companies had a solvency ratio below 100%, with their customer deposits totaling 4.6476 trillion won. A lower solvency ratio indicates a reduced ability to respond to risks such as bankruptcy or closure.
The funeral industry relies on customer deposits paid over many years to provide services like funerals, making the stability of asset management and financial health crucial. However, the management of these deposits has been in a regulatory gray area, raising concerns about consumer losses and service quality. For instance, Parents' Love, the seventh-largest company in the industry, suffered a loss of 45 billion won after investing 59.5 billion won in a leveraged exchange-traded fund that tracks a U.S. cryptocurrency mining company.
Industry insiders point out that issues have arisen due to lax management among some mid-sized and small firms with deposits under 100 billion won. The recently enacted installment sales law requires thorough reviews before high-risk investments and recommends the establishment of a fund management committee for companies with deposits exceeding 100 billion won. An industry representative noted, 'Due to limited personnel at the Fair Trade Commission, oversight has primarily focused on the top 10 companies, where 80-90% of deposits are concentrated, leaving small firms in a regulatory blind spot.'
Top funeral companies assert they already have internal control systems in place as outlined in the proposed amendments. A representative from the industry leader, Woongjin Free Life, stated, 'We have a dedicated asset management department staffed with professionals, and all major investment decisions are reviewed by an investment committee. Transactions involving related parties or high-risk assets require consultation with external experts such as accounting and law firms.'
Experts emphasize that this amendment marks the first application of asset health regulations to small firms in the funeral industry. Choi Soo-jung, a researcher at the Small and Medium Business Administration, explained, 'Most companies in the funeral industry are small, except for a few large ones, so this amendment will be the first asset health regulation applied to them.' She added, 'Both the lending and borrowing companies will be subject to penalties, so small funeral firms must first examine loans to major shareholders and affiliates and establish internal control systems within the grace period.'
As the funeral industry expands and bundled products, including electronics, become more common, consumer compensation claims are also on the rise. According to data submitted by Democratic Party lawmaker Son Myung-soo to the National Assembly's Political Affairs Committee, there were 254 compensation claims related to funeral services from January to August this year, a 25.7% increase from the total of 202 claims last year. Compensation claims have risen annually, from 149 in 2023 to 176 in 2024 and 202 in 2025. Consultations regarding bundled products increased from 16 in 2021 to 121 last year, and by August this year, there were already 141 consultations, surpassing last year's total.
* This article has been translated by AI.
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