The Missouri State Board of Embalmers and Funeral Directors and the Board’s staff are engaged in an awkward exercise of establishing audit policies for the state’s preneed industry. The staff, employees of the Division of Professional Registration, must take the lead in making recommendations to the Board. The Board then must approve the recommendations, or instruct the staff on revisions, or make direct the staff to take a different direction.
However, the “Staff Recommendations” for the scope of Missouri’s second round of preneed examinations more resemble a request for an industry confidence vote than the start to a definitive road map for licensee compliance. A crucial regulation proposal that would define the recordkeeping requirements for sellers has been tabled to a later meeting. The Staff Recommendations allude to a procedural examination handbook, but only offer an update as to the status of such a handbook by the “Fall 2016”. As a consequence, the Staff Recommendations offer only a few concrete issues for Board approval.
One issue is whether a seller’s examination should include a review of all preneed contracts sold since the last examination. Some industry representatives, including this author, have suggested that the examination process allow for a sampling of contracts. But, at the Board’s December meeting, the staff included testimony from an examiner with the Missouri Department of Insurance. The testimony was given with the purpose to demonstrate that insurance companies have far more comprehensive filings (than do funeral homes) that assist the regulator to assess the risk of company failure. That testimony elicited questions and comments from industry members regarding the failure of that system to prevent the collapse of Lincoln Memorial Life. We did not find the Department of Insurance testimony persuasive for the fact that SB1 did not make the solvency of the seller funeral home a factor. The intent of the statute is to ensure the consumer funds are available regardless of the fate of the funeral home.
We agree with the staff’s comments that some sellers have too few preneed transactions to make a sampling review statistically reliable. But the question some sellers ask is what does the 100% review entail. If the seller’s first examination did not result in any exceptions for contract form compliance or completion issues (proper signatures and service descriptions), then why must all contracts be reviewed for those same issues. Why not a sampling as to those areas of review?
The Staff Recommendations do provide for a sampling review of ‘other active and fulfilled preneed contracts’. While some industry representatives will complain about any review of fulfilled contracts, we see the need for a review of at least a sampling of such contracts. But, the sampling review of fulfilled contracts is one example of where an exam procedures handbook could help alleviate industry concerns. Missouri funeral homes might be more receptive to the financial examination if the staff first defined the procedures.