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Funeral insurance

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  • Erlend Berg

Abstract

Funeral insurance has existed at least since antiquity, and it remains popular in many parts of Africa today. Yet the study of funeral insurance as a distinct form of insurance has hitherto been neglected. This paper presents a model in which funeral insurance combines regular life insurance with a restriction on how the payout is spent. The model predicts that there is an intermediate range of income and wealth where funeral insurance is demanded. The prediction is tested on a nationally representative sample of black South African households, a setting where both life and funeral insurance are widely available. The model also gives conditions under which funeral insurance is not demanded at any level of income and wealth. This may explain why funeral insurance is less popular in developed countries, even among the relatively poor.

Suggested Citation

  • Erlend Berg, 2011. "Funeral insurance," CSAE Working Paper Series 2011-16, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2011-16
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    File URL: https://ora.ox.ac.uk/objects/uuid:a5ec2e1b-052a-4892-b385-075c7d7c8802
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    References listed on IDEAS

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    1. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
    2. J. Bryant & A. Prohmmo, 2002. "Equal Contributions and Unequal Risks in a North-east Thai Village Funeral Society," Journal of Development Studies, Taylor & Francis Journals, vol. 38(3), pages 63-75.
    3. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 209-244.
    4. Bernheim, B Douglas, 1991. "How Strong Are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 899-927, October.
    5. Dercon, Stefan & De Weerdt, Joachim & Bold, Tessa & Pankhurst, Alula, 2006. "Group-based funeral insurance in Ethiopia and Tanzania," World Development, Elsevier, vol. 34(4), pages 685-703, April.
    6. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence From a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 635-672.
    7. Levenson, Alec R. & Besley, Timothy, 1996. "The anatomy of an informal financial market: Rosca participation in Taiwan," Journal of Development Economics, Elsevier, vol. 51(1), pages 45-68, October.
    8. Johnson, Paul A, 1985. "The Economics of Old Age in Britain: A Long-Run View, 1881-1981," CEPR Discussion Papers 47, C.E.P.R. Discussion Papers.
    9. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," World Bank Research Observer, World Bank Group, vol. 17(2), pages 141-166, September.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why is funeral insurance so popular in Africa?
      by Economic Logician in Economic Logic on 2011-11-08 22:41:00

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    Cited by:

    1. Emmanuelle Auriol & Julie Lassébie & Amma Panin & Eva Raiber & Paul Seabright, 2020. "God Insures those Who Pay? Formal Insurance and Religious Offerings in Ghana," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 1799-1848.

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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