During the summer following NPS’ collapse, the Missouri Division of Professional Registration provided crucial leadership to building the consensus required for Senate Bill No. 1.  Rushed efforts to re-write the Missouri preneed law had failed, and the Legislature then turned to the Division.  Represented by Connie Clarkson, Becky Dunn and Kim Grinston, the Division prepared a draft bill, formed a committee of regulators and industry representatives and coordinated a series of meetings.  Led primarily by Ms. Grinston, the Division promoted a frank discussion among the members of the working group committee.  One of the Division’s top priorities was to fix the law’s failure to address insurance funded contracts.  For years, the State Board had relied upon an attorney’s opinion, and the Division was puzzled by the trust requirement being imposed on sellers who only sold insurance.

Within two years of the passage of Chapter 436, the IRS issued Rev. Rul. 87-127, and several large preneed sellers switched to insurance funding to avoid onerous tax reporting requirements.  Some of those sellers saw the gap in the Missouri law, and a way to avoid paying the $2 contract fee.  The attorney assigned to the Board wrote an opinion that was the used to threaten sellers into paying the $2 fee on insurance funded contracts.  We may never know why the opinion required a trust.  The opinion was not formally issued by the Attorney General’s Office and the State Board would not release the opinion.

The Division went into the 2008 meetings seeking a very broad definition of insurance funded preneed contracts:

  1. No preneed seller or provider shall accept an assignment of insurance proceeds or knowingly allow the preneed seller or provider to be designated as the beneficiary in an insurance policy unless a preneed contract has also been issued by a licensed seller. A preneed contract shall only be required by this section if the insurance proceeds are to be used for the final disposition of a dead human body, or for funeral or burial services or facilities, or for funeral merchandise, where such disposition, services, facilities or merchandise are not immediately required and the price of such services, facilities or merchandise are guaranteed by the provider or seller.  A preneed contract written pursuant to this subsection shall be deemed an insurance-funded preneed contract and shall comply with this section and all applicable provisions of sections 333.700 to 333.900.

The working committee agreed with the need to regulate the sale of insurance funded preneed contracts, but objected to the Division’s draft bill.  The Division dropped the draft bill and shifted gears to work out a consensus on the issues.  The insurance assignment issue was kicked down the road until the September 4, 2008 State Board meeting.   The agenda for that meeting included the working group draft recommendations where certain  “Insurance Restrictions” were included.  Those restrictions drew comments from working group members who sought clarification on the Division’s intent.  The insurance assignment discussion begins on page 50 of the September 4th transcript, and the Division stated early that “if someone walked into your funeral establishment with a term-life policy that was already sold and said I want to sign these proceeds over to the funeral home, that wouldn’t be prohibited, but I would be prohibited from selling  you the term-life policy and the preneed policy together…”.  The Division’s main concern was over the sale of term life policies, not the assignment of insurance that consumers purchased from third parties.  As one working group member phrased it, the assignment of an insurance policy to the funeral home as beneficiary was more in the nature of preplanning, not prepayment.   To avoid any confusion on the issue, the Division agreed to remove the “Insurance Restrictions” recommendation from the working group’s final recommendations to the Legislature.

The Division’s handling of those 2008 meetings earned respect and trust from the Missouri funeral industry.  But that respect and trust began to erode a few years later when a different Board staff proposed a regulation to ‘re-define’ insurance funded preneed contracts to include insurance assignments.  The relationship worsened as the Division staff adopted an adversarial style with licensees and implemented policies that exceeded the Board’s authority.  The Division now has an opportunity to rebuild the industry’s trust by returning to the same honest approach taken in 2008.   No more overreaching with licensees or manipulating the State Board.