Another Organ Incentive, and … Funeral Insurance?

We’ve written repeatedly on the shortage of human organs for transplantation, and the different incentives that are being offered to produce more donated organs. Among the incentives: a commemorative medal and a shorter prison term. Now a reader named Ronald Wielink writes to tell us that in the Netherlands, a funeral insurance company is offering to cut funeral costs by 150 euros if the deceased has donated an organ. (Here’s a brief link in English; here’s one in Dutch.)

As Wielink explains, this incentive came about from urging by the Kidney Foundation charity. The donors get either a discount on their funeral insurance or a discount on the burial cost itself. “There are also some M.P.’s,” he writes, “who propose that organ donors should get a discount on government fees, e.g. getting a passport.”

I had two initial reactions to hearing about this incentive:

1. Creating a connection between donating an organ and your own death wouldn’t seem to be the most appealing incentive.

2. Funeral insurance? What the heck is funeral insurance? Surely such folly doesn’t exist in the U.S., right? Wrong. As someone who tries to buy as little insurance as humanly possible, I cannot think of many forms of insurance that are less worthwhile. Can you?

(Hat tip to Dan Sage too; also, Marginal Revolution blogged about this a while back.)


dgriffith

Like so many things that seem to make no economic sense, funeral insurance is basically a tax or benefits dodge. A prepaid funeral doesn't count as an asset toward Medicaid eligibility, making it reasonable to hide some dollars there if you are looking to go on Medicaid. There are probably some other tax impacts as well (estate?), but that's the big one.

fabunobo@yahoo.com

I really cannot imagine being concerned about anything other than a pine box when I am dead.

angelofthenorth

The first link that you have is in the UK. Funerals are getting expensive, and it's basically a pre-paid funeral plan.

Speaking as someone who fell into the poverty trap when her father died, they're a good idea and should be compulsory - maybe as part of a pension package.

To explain: Dad died when I was 20 and a student. I wasn't eligible for a grant because I wasn't receiving benefits. I wasn't eligible for a loan because I wasn't earning yet. Fortunately, friends clubbed together and paid for it. If there had been an estate to inherit from, I would still have struggled to get the money in time as the financial situation made life difficult to get credit.

My grandmother, on the other hand, had sorted hers out (as has my mother - who is still alive), and it meant that while they were waiting for probate the funeral could go ahead, and be paid for without undue stress. No family fighting about what the funeral ought to be like and we knew we were honouring her memory.

People don't like to think about dying. They really don't want to think about dying with particularly bad timing for their families.

Love
Miriam

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nothings

One of the early google links offers this tidbit:

"In Washington State, by regulation, insurance companies are not allowed to collect more in premiums than the face value of the funeral insurance policy."

Everyone dies. The sum of the premiums cannot exceed the face value. Is there really profit to be made in the difference between the insurance policy face value and the actual cost of an insurance, or in the (presumably) tiny number of people who pay the insurance and never collect?

liberalarts

On point 1., if people know that signing an organ donor card leads them (or their estate) to get 150 Euros at death, then a person who wished to was planning on leaving a 25,000 Euro estate could do so with 24,850 Euros and go out for a nice dinner now. Thus, for those who plan a bequest, a payment after death is as good as one right now. Of course, the discount of 150 Euros is probably just a marketing scam, with nearly everyone qualifying for such a discount for many reasons. (For example, pulling nearly any membership card out of your wallet at a motel will get you the same discount as a AAA card, so the AAA discount is not a reason to join AAA.)

Twoflower

I agree with comment #3 above, I believe that funeral insurance is very worthwhile. I have it myself (I am Dutch, 33 years old). The main reason is that I do not want to leave a huge bill for my relatives to settle.

Why do you believe it is useless? Certainly you could put aside some money yourself and save towards paying your funeral, but you may die young... Also the cost is quite cheap, I believe I pay something like 40 Euros per year.

vtgrad03

I recently read a paper "Maps of Bounded Rationality: Psychology for Behavioral Economics" by Daniel Kahneman, in which he referenced work done by Johnson and Goldstein called "Do Defaults Save Lives?" (2003). The pertinent statistic from his mentioning was: in countries where participation in organ donation is automatic and you have to file to be removed from the program, participation is 97.4%, and where participation is not the default, a mere 18% donates.

It seams to me the solution is to change the default in the US, not to provide incentives.

frankenduf

the funeral industry is a scam- profits are made here by exploiting the bereaved

Bakayaro

An observation and a question.

Observation on comments 5 and 7, isn't the organ donation being discussed of the pre-mortem variety (i.e., a kidney, a lung or some liver while still alive) rather than signing an organ donation card?

Question to Stephen on the original post: you say you purchase as little insurance as possible. As someone who loaded up on disability insurance on the advice of my financial planner, I'm curious to know why you avoid it?

dgriffith

The sum of the premiums cannot exceed the face value. Is there really profit to be made in the difference between the insurance policy face value and the actual cost of an insurance, or in the (presumably) tiny number of people who pay the insurance and never collect?

Time value of money. Collect the money early, pay it out late, collect the interest.

It's worth noting that most individual insurance policies pay out more in benefits and sales costs than they bring in via premiums, on average. Last I heard the industry average was 98 cents brought in for every dollar paid out. Profit is entirely due to the float.

vtgrad03

Bakayaro:
The issue is a shortage of organs from either dead or alive donors. But, if we had 97% enrollment in post-mordem donations i highly doubt we would need as many living donors.

Does anyone know if patients can get foreign organs? Can an American get a Frenchman's kidney? Maybe there is a market for imported organs.

Bakayaro

vtgrad03:
I know there is an issue wrt organ donation from live or deceased donors, but the whole point of the post was about providing incentives for donations while still alive (a medal, shortened prison term, lower insurance premiums). In the example of kidney donation, (and probably other organs) live donors are much better than dead ones, so increasing the number of deceased donors might be less helpful overall. (http://www.giftoflife.on.ca/page.cfm?id=7C0E91D1-B651-4694-AC11-F53B7F269D22#7da4dcee870341bd023ab4c54b655173)

echan

I don't know why funeral insurance is so surprising. The NYT ran a piece last December about it's popularity in the African American community. While it is not my cup of tea, I can see how it offers peace of mind that one will leave the world and rest in the right way.

htb

I was under the impression that after various safety and condition considerations were applied, only ~5% of cadavers were viable candidates for (major) organ donation anyway, so perhaps an 18% participation rate is perfectly adequate -- as long as you get all of the 5% who are eligible.

I don't really know much about this area, but my impression is that you are unlikely to be a good candidate for donating major organs if:

* you die from most kinds of cancer or ever had any form of blood cancer [there goes a third of the population],

* you die from most kinds of chronic heart or lung diseases [there goes another third],

* you had an infectious disease (from HIV to chicken pox) at the time of death, or

* it takes more than an hour or two to get you to a hospital (if you die peacefully in your own bed, like most of us say we'd prefer).

Most of this is simply because if your heart isn't working well for long enough, then your liver/kidneys/heart/etc. will be in such poor condition that they're not worth transplanting. (Tissues, like tendons and bones, are a different story, as are cadavers for dissection.)

I'm sure there are exceptions, and it makes sense to evaluate each cadaver individually, but the exclusion criteria are so significant that it's really absurd to talk about any society having a 97% participation rate. It would be absurd to talk about a society that had a 50% rate!

And... even Spain, which claims that lofty rate, expects 10% of the people on their transplant list to die for lack of a donor. Increasing participation to 100% won't significantly change the number of people dying from kidney failure. We might be better off fixing the diabetes and alcoholism problems so that fewer people end up in this state in the first place.

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kaveh0915

Unfortunately, foreign organs aren't really an option. Even if there wasn't any red tape (which isn't likely) the transportation time would be too much. These things have to happen very quickly and luck has a lot to do with it. My uncle recently passed away and before his condition worsened, he was on the transplant list for his lung. Not only did the donor have to have the same blood type and compatible tissue, but the size had to be similar, it had to be healthy enough (meaning someone who was sick in the hospital for a year probably wouldn't be good enough), and it had to be close enough so they could do the transplant in time. Since we live in Florida anywhere in the Southeast would have been OK.

Two things shocked me the most, though. First, not every hospital has the right equipment AND talent to do organ transplants. Second, the doctors told us that most of their transplants happen on Friday and Saturday nights...especially when it's raining. Apparently the best "donors" are car accidents.

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marketingeasy.blogspot

Hi there,
Usually I agree or at least I take in consideration your reflexions, but I completelly disagree with the idea that "Creating a connection between donating an organ and your own death wouldn't seem to be the most appealing incentive".
I really see as the most appealing incentive since well positioned as strategy.
Its all about yourself saving a life and having your name respected in the future.
Can you imagine the possibility to redeem yourself doing the right thing?
Cheers
Lucio

Paddyboy

According to this British mortality table http://www.gad.gov.uk/Life_Tables/docs/wltukm0305.xls, the likelihood of a 33 year old man dying in the next year is slightly over 1 in 1,000.

BarneyF

Surprised to hear you've never heard of funeral insurance. It is a big issue in the area of microfinancing in Africa.

Also, although I don't have a source on this, funeral insurance is a major pole of informal finance in Southern black society. It is noticeable that a lot of black American community leaders inlcuding civil rights heros sons of funeral directors.

MisterRisky

As Barney mentioned above, funeral insurance is quite popular in Africa. I did some insurance work in Africa and spent some time trying to understand the popularity of funeral insurance. In fact, much of what was marketed as life insurance was really funeral insurance as it paid out less than the average funeral cost. The reason seems to be driven by the cultural importance of expensive funerals. Expensive relative to the family income. When the desire of most people is to have a grand funeral, yet earnings are very low, there becomes the need for a savings vehicle. There is also the risk of dying young before you saved enough for a grand funeral and thus would disgrace yourself and your family. So people buy insurance as a dual purpose savings vehicle / life insurance policy to cover an important cultural custom. (I think marriage in some cultures carries this type of financial burden.)

As a white middle class man, why do I buy life insurance? My wife has as much earning potential as I do so I don't buy it so she won't starve. I buy it so my wife won't feel financial pressure if I die and my kid will be able to afford an Ivy league education if she so desires. Why? Because that's culturally important to me. But I would never buy funeral insurance... that's just crazy and financially unsophisticated. *wink*

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Endymion

When I die, I'd like to be disposed of in the fastest and least expensive way possible, but that simply won't happen. My parents and friends are unreasonably sentimental, but mostly, it's illegal. I can't have my remains just chucked in the landfill, I have to do something expensive instead. I'm still young, so my death would most likely be accident-related, and if I do encounter the out-of-control-milk-truck of fate, I'm content with sticking my parent's with the bill(and hopefully sending a few giblets to the University hospital), but if I didn't have that financial cushion, I'd value the insurance pretty highly.