The next section of Missouri record keeping proposal addresses funeral homes that handle insurance premium payments. For funeral homes that rely upon insurance funding for their preneed program, the initial payment is typically handled by the funeral director or preneed agent, and then subsequent premium payments are made directly to the insurance company. However, some funeral homes also handle the monthly premium payments. For these two situations, Missouri funeral homes would be required to satisfy the following record requirements:
- For insurance funded preneed contracts, if the seller or the seller’s agent receives payment from the consumer for the insurance:
(1) Records that show the date, the name of the person paid, a description of any consumer payments received, and records showing any account into which those funds are deposited; and
(2) Records showing the date, the name of the person or entity paid, and description of payments to any insurance company.
The first question that arises about this section concerns the phrase “the name of the person paid”. That phrase is open to different interpretations. And then, what kind of “description of any consumer payment” is the rule contemplating? Source of funds? The next second subparagraph then again seeks “the name of the person or entity paid”. How is that “person paid” different from the person paid referenced in the prior paragraph?
But, what is perplexing about this section of the proposal is what records are not required: receipts and disbursements made by the insurance company. In our prior post we discussed the rule’s provisions requiring trust disbursement records, and how those records would have allowed regulators to track disbursements made from NPS trusts. But, the NPS abuses that brought down the Ponzi scheme were made by the insurance company Lincoln Memorial. NPS used white-out to change single premium contract purchases to installment payments, and then policy loans were used to obtain funds before the contract was serviced. If the misconduct of NPS is the basis for requiring additional trust records, then the rule proposal should also address the abuses perpetrated by the insurance company. Borrowing from the prior section of the rule proposal, the following records would also be required:
(3) If funds for a preneed contract are paid by the consumer directly to the insurance company, the seller shall maintain, or be able to access, records from the insurance company showing the dates and amounts of each premium and the name of the preneed contract beneficiary for each premium received; and
(4) Records showing any disbursement from an insurance policy for any purpose other than cancellation or fulfillment of a preneed contract with a description of the purpose for the disbursement, and the date, amount and to whom the payment was made.
We also question why different types of records are required based on the type of funding used. In response to this issue, we had suggested the following record to the State Board:
With regard to consumer funds received by the Seller or the Seller’s agent, the Seller shall create and maintain a consumer receipts record for each calendar month that reflects the following:
- The purchaser’s name;
- The payor name if different than the purchaser;
- The preneed contract number;
- The date received;
- The source of funds (cash, check, money order, etc)
- The date the funds were submitted or forwarded to the funding agent;
- The funding agent (if the consumer receipts journal is maintained for more than one funding agent);
A Seller shall create a consumer receipts record for every month including those months in which no payments were received, until all contracts are paid in full or have lapsed according to the terms of the preneed contract.
The seller may, but is not required, to maintain a separate consumer receipts record for each funding agent used.