Funeral Insurance: An Inter-Generational Commitment Device?. (22nd November 2017)

• Record Type: Journal Article
• Authors: Berg, Erlend
• Is Part Of: Journal of African economies. Volume 27:Number 3(2018)
• Page Start: 321
• Page End: 346
• Publication Date: 2017-11-22
• Subjects: funeral insurance -- life insurance -- insurance demand -- commitment device; Africa -- Economic conditions -- 1960- -- Periodicals; Africa -- Economic policy -- Periodicals; 330.96
• DOI: 10.1093/jae/ejx037
• Languages: English
• ISSNs: 0963-8024

Abstract

Abstract: Funeral insurance is a global phenomenon that has existed throughout history and remains hugely popular in Africa today. Yet as a distinct financial device it has received little attention. The question is why it seems, in many contexts, to be preferred over standard life insurance even though the latter is a more flexible product. This paper presents a simple model in which funeral insurance differs from life insurance in that there is a constraint on how the payout is spent. Funeral insurance can therefore serve as an intergenerational commitment device. The model's key prediction is consistent with South African household data.