I see the phrase all the time when people die. I suspect those who write or say it think that it's somehow polite or reverential. It's not—it's one of the worst uses of the passive voice out there, because it drains an important sentiment of all personality. He will be missed by whom? By you, presumably! If you're saying that you're sad because he died, then say, "I'll miss him." If you're saying that people in general will, then try, "We'll all miss him."
Death is a real thing. I also dislike usages such as, "Three hundred civilians were killed in an attack by rebels today." No. That makes it look like they died because of the indirect activities of "an attack." Better: "The rebels killed three hundred civilians today." People did something, and it's worth writing in a way that makes what they did clear.
He will be missed is evasive and vague and loses all the emotion, and is no more useful (or polite) than saying, "He will continue to be dead" or "He will be cremated." So if someone dies, and you miss them, say so.