UPDATE ON PRENEED ISSUES
By: T. Scott Gilligan, OFDA General Counsel
In the past few months, there have been new and renewed regulatory initiatives that could impact the methods that Ohio funeral homes use in selling preneed funeral goods and services to consumers.
Below, we have examined these issues:
Question: We received a letter written by the Ohio Counselor, Social Worker & Marriage and Family Therapist Board (the "Therapist Board") informing us that the funeral home may no longer use the word "counselor" when selling preneed. We have an employee, whose title is Family Preplanning Counselor, that is in charge of our preneed program. Do we need to delete the reference to "counselor" from her title?
Answer: If the Family Preplanning Counselor is a licensed funeral director, she may retain the term "counselor" in her title. If, however, the employee is not a licensed funeral director, she must stop using "counselor" in her title.
When funeral homes across Ohio received the directive from the Therapist Board to refrain from using the word "counselor," OFDA immediately contacted the Executive Director of the Therapist Board. While we acknowledged that Section 4757.02 of the Ohio Revised Code does prohibit the unauthorized use of the word "counselor," we also pointed out to the Therapist Board that Section 4757.41 provided an exemption for any licensed professional working in the scope of their recognized profession. Since licensed funeral directors selling preneed funeral services are operating within the scope of their profession, OFDA indicated that it would advise licensed funeral directors that they could continue to use the title "counselor."
After receiving OFDA's letter, the Therapist Board agreed. It now recognizes that licensed funeral directors may refer to themselves as "counselors" in the scope of arranging and performing funeral services. However, individuals not holding a funeral director's license may not use the word "counselor" in their titles.
Question: We heard that the Board of Embalmers and Funeral Directors have fined several Ohio funeral homes for using insurance agents as preneed sales persons. Must we discontinue using insurance salesmen as representatives of the funeral home?
Answer: Insurance agents who do not hold funeral director's licenses may sell insurance policies to fund preneed contracts, but may not sell preneed funeral services that are included in that contract. Only licensed funeral directors may sell the funeral services that are included in a preneed contract.
In July, 2001, the Ohio Attorney General, at the request of the Board of Embalmers and Funeral Directors, issued an opinion letter on what activities an insurance agent may and may not undertake in the preneed arena. While the Attorney General's Office acknowledged that the demarcation between permissible and impermissible activities is not black and white, it did provide the following guidance:
(1)An insurance agent meeting with a preneed consumer may display a funeral home's GPL to estimate the approximate cost of the funeral the consumer may wish to purchase. Using that estimate, the agent may sell the consumer an insurance policy.
(2)The insurance agent may represent a particular funeral home and may list the funeral home as the beneficiary in the insurance policy sold to the preneed consumer.
(3)The insurance agent may record the consumer's wishes regarding the particular funeral goods and services they want on a non-binding estimate sheet and provide that estimate sheet to the funeral home.
(4)An insurance agent may not fill in the preneed funeral contract with the funeral goods and services desired by the preneed consumer. The insurance agent should also not sign the preneed funeral contract.
(5)A licensed funeral director must be the person who fills out and signs the preneed contract after consultation with the preneed consumer.
Question: If we continue to allow an insurance agent to meet with preneed consumers, what protection should be employed to make it clear that the agent is not selling preneed funeral services.
Answer: We have advised other OFDA members that the estimate sheet being prepared by the insurance agent should contain prominent disclosures that inform the consumer that the estimate sheet is not a preneed contract. Sample language could include the following:
"ESTIMATE: By using your preferences indicated below, we can estimate the approximate cost of the funeral arrangements you may purchase from the Funeral Home. This will enable us to sell you a life insurance policy to fund the eventual purchase. This estimate is not a contract and you are not purchasing the services and merchandise listed below. You may only purchase these items from a licensed funeral director."
Question: In order to complete the preneed transaction, does the funeral home need to have a licensed funeral director meet with the preneed consumer to fill out the preneed contract?
Answer: While it is not clear from the Attorney General's opinion that it is necessary to have a consultation between the funeral director and the preneed consumer, we would advise that the funeral director either communicate by telephone, e-mail, or in-person to consult with the preneed consumer regarding the selection of funeral goods and services to be listed on the preneed contract. Since only a licensed funeral director may sell preneed funeral services, the best evidence that the preneed contract was negotiated by a licensed funeral director would be to show that the funeral director directly consulted with the consumer before recording the funeral goods and service selections on a binding preneed contract.
OFDA members with questions regarding preneed matters may contact Scott Gilligan at (513) 871-6332.