The newest edition of the Missouri Preneed Exam Handbook has some significant problems. The one we will discuss today is ambiguous instructions regarding the review of preneed contracts. Paragraph 13 of the Handbook’s scope of financial examination states:
13) Staff shall look at 100% of all active preneed contracts that have been sold since the period covered under the last financial examination and may look at a sampling of other active and fulfilled preneed contracts, at the direction of the executive director and examiner supervisor, as required to assure fulfillment of the general directives of the board as set forth in these guidelines.
The Handbook then sets out the paragraphs of §436.425. While an earlier part of the Handbook indicates that a seller’s contract form will be requested for review as part of the pre on-site process, Paragraph 13 indicates the examiner will repeat §436.425 review on each contract sold since the last exam. And then that same type of review will also be conducted on a sampling of contracts that were also part of the seller’s prior exam.
The vast majority of the requirements of §436.425 pertains to contract form disclosures. Three paragraphs of §436.425 pertain to how the contract must be completed by the seller. With regard to §436.425 contract disclosures, why should examiners first review the contract form and then all outstanding contracts? And then, why do the same type of review on contracts reviewed in the seller’s prior exam? Do the contracts change over time?
As the highlighted language of Paragraph 13 indicates, the Handbook will be the Board’s directives on how to conduct exams. Those directives need to be complete and clear. So, if a 100% review is necessary for consumer protection, the Handbook needs to be clear about what that review entails. Is the consumer’s $25 fee being well spent by having examiners double and triple check contracts for the required disclosures?