The Missouri State Board of Embalmers and Funeral Directors introduced a new preneed examination handbook at its October meeting.  (Click the following hyperlink to access the preneed handbook.)  The proposed handbook would change the emphasis of the preneed exams from contract and recordkeeping compliance to tracking consumer funds paid to the funeral home.

For most Missouri funeral homes, the preneed examination conducted after the passage of Senate Bill No. 1 in 2009 was their first.  Preneed funeral sales have been regulated by the State Board since 1982, but a random audit process meant that the vast majority of funeral homes had never been through an exam.  So when new exam powers were given the Board in 2009, the initial goal was to review 30 years of contracts and records, and ensure funeral homes were using compliant contracts and keeping adequate records to track consumer funds.   This meant that examiners had to wade through decades of preneed transactions.  Those first exams were anticipated to be time consuming.

With each funeral home having now been through a preneed exam, the State Board looks to expedite the process and provide greater consumer protection.  We will use future blog posts to review key changes proposed by the Board, but the following is a summary of the changes:

  • More of the examination would be conducted as a desk review before the on-site visit is scheduled.
  • Rather than review each outstanding preneed contract for Section 436.425 compliance, the examiners would review a seller’s contract form for disclosure requirements, and then a percentage of outstanding contracts are reviewed for completion in accordance with Section 436.425 (signatures, addresses, phone numbers and service descriptions, etc).
  • Examiners would be provided guidelines for Section 436.425 contract form compliance. The procedures used for the first round of exams did not provide guidelines about how to apply Section 436.425 to the various forms of preneed contracts.  Section 436.425 contemplates different types of preneed contracts (trust funded, insurance funded, joint account funded, guaranteed, non-guaranteed, etc), but the handbook did not address these differences and many sellers were erroneously cited for contract exceptions.
  • Examiners would begin reviewing seller records that reflect when each consumer payment was received, and then transmitted to the preneed funding agent.
  • Performed and canceled preneed contracts would be reviewed for corresponding disbursement payments from the preneed funding agent.
  • Sampling percentages would be set for a seller based on prior exam results. The fewer financial based exceptions the smaller the sampling percentage.  Funeral homes with significant exceptions would be subjected to a 100% review.