The number of consumers who are converting preneed funds paid over long periods, originally intended for funerals, into other uses such as travel or weddings is growing rapidly. Preneed service companies are also positioning conversion services as a new growth pillar, as they can reduce the debt burden associated with accumulated advance payments and broaden their engagement with consumers.
According to industry sources on the 30th, Gyowon Life's utilization of its conversion service from January to August increased by approximately 150% compared to the same period last year. With 63% of conversion service users choosing travel, travel-related conversion usage rose by 149%. During the same period, Woongjin Friedlife saw its number of conversion service transactions increase by roughly two times compared to the previous year, with travel accounting for 75%. In contrast, Boram Preneed Service experienced a significant surge in its wedding conversion service, which grew by 27.5% over the same period.
The conversion service is a system that allows subscribers to use their preneed funds for services other than funerals, such as travel, weddings, or health management. It addresses the limitations of preneed products, where funds paid over 10 to 20 years cannot be utilized until a funeral occurs, and also helps reduce the financial burden on consumers associated with long-term payments.
According to the Fair Trade Commission, as of the end of March, the number of registered contract holders for preneed products exceeded 11 million, and the total advance payments made by subscribers to preneed service companies was estimated at over 11 trillion won. As the subscriber base grows and payments accumulate, how to utilize these advance funds before a funeral becomes a critical challenge for preneed service providers.
In practice, conversion services offer financial benefits to preneed service companies. Advance payments are recorded as liabilities until the service is provided, meaning that the longer a contract remains active, the greater the financial burden becomes. However, when advance payments are utilized through conversion services, they are recognized as revenue and operating profit, which also helps mitigate concerns about potential cash outflows resulting from cancellations after maturity.
An industry official stated, "Customers can experience tangible benefits by utilizing their preneed funds, while companies can improve their financial structure, making it a win-win situation for both parties."
The competition in conversion services aligns with the trend of preneed service companies expanding their scope into "life care." While services are generally provided through partnerships with specialized firms, companies with their own business infrastructure can also quickly adapt their offerings to meet demand. For example, Gyowon Life leverages its affiliate Gyowon Tour for travel products, while Boram Preneed Service utilizes Boram Convention as a strength in the wedding sector.
The variety of conversion services is also expanding. Woongjin Friedlife will offer overseas English camps from January next year, conducted over three to seven weeks in seven countries including the United Kingdom, the United States, Canada, and New Zealand. It has also added storage of adipose stem cells and immune cells to its conversion service menu through a partnership with Medipost. Boram Preneed Service allows for the partial use of preneed funds.
The industry forecasts that while funerals still account for an overwhelming share of services, the market for conversion services will continue to expand. A representative from Gyowon Life commented, "We are transitioning from a limited image centered on funerals to a life care model that manages the entire life cycle."
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