SB 1 Establishes licensing and contract requirements for preneed funeral contract sellers, providers, and seller agents
Sponsor: Scott
LR Number: 0404L.09T Fiscal Note: 0404-09
Committee: Financial and Governmental Organizations and Elections
Last Action: 7/9/2009 - Signed by Governor Journal Page:
Title: HCS SS SCS SB 1 Calendar Position:
Effective Date: August 28, 2009
House Handler: Wasson

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Current Bill Summary


HCS/SS/SCS/SB 1 - This act establishes licensing requirements for preneed funeral contract sellers, providers, and seller agents and establishes requirements for all preneed contracts.

All preneed providers shall be registered to conduct business in Missouri and identify a custodian of records and any seller authorized by the provider to sell preneed contracts in connection with the seller. If the applicant is a corporation, each officer, director, manager, or controlling shareholder shall be eligible for licensure if they were individually applying for licensure. (Section 333.315)

All preneed sellers shall be registered to conduct business in Missouri and identify a custodian of records and any provider that has authorized the seller to designate such person as a provider under a preneed contract. If the applicant is a corporation, each officer, director, manager, or controlling shareholder shall be of good moral character and be eligible for licensure if they were individually applying for licensure. Sellers shall also establish a trust in order to sell trust funded preneed contracts. (Section 333.320)

Preneed agents selling contracts on behalf of a seller shall be at least 18 years old, have successfully passed the Missouri law examination, and provide the name and address of each seller for whom the applicant is authorized to sell preneed contracts. (Section 333.325)

The grounds for denial, suspension, and revocation of licenses and registrations are made the same for embalmers, funeral directors, preneed sellers, preneed providers, and preneed agents. Individuals whose license or registration are revoked shall wait three years to reapply. The board may enjoin sellers from engaging in preneed sales when the seller has failed to make deposits into the trust, obtained funds out of the trust to which the seller is not entitled or causes any other shortage in any trust fund or joint account which exceeds 20% of the total required to be held or deposited in trust. (Section 333.330)

Persons shall not be designated as a preneed provider unless they have a written contractual agreement with the seller stating as such. (Section 436.420)

The act enumerates provisions required to be included in all preneed contracts. (Section 436.425)

In the case of a trust funded contract, sellers shall place 100% of all payments on a contract into the trust within 60 days of receipt. Trustees may distribute up to the first 5% of the total amount of the contract as an origination fee after such amount has been deposited into the trust. The trustee may distribute up to 10% of the face value of the contract at any time after the consumer payment has been deposited into the trust. Payments of two or more contracts may be commingled in the same preneed trust if adequate records are kept. Expenses of establishing and administering the trust may be paid from income generated from the investment of the trust assets. Principal of the trust shall not be used to pay the costs of administration of the trust. Sellers and providers are entitled to all of the income of the trust according to the terms of the contract, less the administration fees, which shall accrue through the life of the trust, the market value of which may be distributed upon termination of the trust. (Section 436.430)

Trustees shall be held to the prudent investor standard and shall diversify the investments in the trust unless the trustee reasonably determines that the purpose of the trust is better served without diversification. (Section 436.435)

Sellers, providers, and preneed agents shall not receive or collect from the purchaser of an insurance funded preneed contract, any amount in excess of what is required to pay the premiums on the insurance policy as assessed or required by the insurer as premium payments for the insurance policy. Sellers shall not collect any fees from the purchaser of an insurance funded preneed contract, other than those fees assessed by the insurer. Providers, sellers, and agents shall not procure or accept a loan against an insurance contract used to fund a preneed contract. The purchaser or beneficiary shall be the owner of the insurance policy purchased to fund a preneed contract which shall only be valid if the seller or provider is named as the beneficiary or assignee of the policy. If the proceeds of the policy exceed the cost of goods and services provided pursuant to the nonguaranteed contract, any overage shall be paid to the estate of the beneficiary or to the state if the beneficiary received public assistance. (Section 436.450)

Sellers and purchasers may agree to use a joint account to fund the contract. A separate joint account shall be established for each preneed contract. All payments shall be deposited in the account within 10 days of receipt of the payment by the seller. Financial institutions shall not invest the funds of the account in term life insurance or any investment that does not reasonably have the potential to gain income. (Section 436.455)

Purchasers may cancel a revocable contract any time without cause. In the case of a joint account funded contract, all deposited funds shall be returned to the purchaser and interest shall be distributed as provided in the agreement between the seller and purchaser. In the case of a trust funded contract, all of the trust property including any percentage allowed to be withdrawn but excluding interest, shall be returned to the purchaser. The insurance contract shall determine distribution in the case of an insurance funded contract. (Section 436.456)

Sellers may cancel a trust funded or joint account funded contract if the purchaser is in default for over 60 days. Purchasers may remit payments in arrears if te seller chooses not to cancel the contract. If the purchaser fails to remit payments, the seller may cancel the contract or continue the contract where the purchaser will receive full credit for all payments the purchaser has made. Upon cancellation, 80% of the contract payments shall be refunded to the purchaser. (Section 436.457)

Purchasers may select a different provider and shall not be assessed any fee for doing so. In such cases, the seller has the option of continuing the trust with the new provider in place of the original under the original agreement or pay to the new trust all of the trust property, including principal and income. (Section 436.458)

Sellers shall file annual reports with the board that includes various information relating to the types of contracts they are holding and the details relating to the trusts and joint accounts holding assets for the contracts and the insurance contracts used to fund the contracts. (Section 436.460)

The board shall have the authority to conduct random inspections, investigations, and audits of preneed providers, sellers and agents, and trust and joint accounts holding assets to fund preneed contracts. Financial examinations shall be conducted at least once every five years. The Attorney General shall have concurrent jurisdiction in conducting inspections, investigations, and audits. (Section 436.470)

Those who knowingly and willfully violate any of the aforementioned provisions is guilty of a Class C felony. (Section 436.485)

Providers and sellers who cease to do business shall notify the board and certain providers, sellers, and purchasers that it is doing so. (Sections 436.490, 436.500)

Preneed contracts may offer the purchaser the option to acquire and maintain credit life insurance on the life of the purchaser to provide for the payment of death benefits to the seller in an amount equal to the total of all contract payments unpaid as of the date of the purchaser's death. (Section 436.505)

This act is similar to HB 853 (2009).

CHRIS HOGERTY