Ohio Enacts New Pre-Need Law
By: T. Scott Gilligan, OFDA General Counsel
On the second-to-last day of the 2008 legislative session, OFDA was successful in its two-year effort to have the Ohio Legislature adopt significant improvements to Ohio's preneed law. Spurred on by two recent high profile scandals involving preneed insurance, OFDA took the lead in drafting SB 196 and shepherding the Bill through the Senate and House. Special thanks goes out to the Bill's primary sponsor, Senator Tim Schaffer, and OFDA lobbyist John McGough who overcame several hurdles, including long negotiations with the insurance lobby, to obtain passage of SB 196.
The Bill, which was signed by Governor Strickland on January 6, 2009, will go into effect on April 6, 2009. OFDA will be publishing a detailed analysis of the Bill later this winter to assist compliance by OFDA members. The highlights of the many changes implemented by SB 196 include the following:
Insurance Funeral Contracts Subject to Preneed Law. Currently, an insurance-funded preneed contract is not subject to Ohio's preneed law. This exemption creates considerable uncertainty as to what jurisdiction, if any, the State Board has over wrongdoing involving preneed insurance.
SB 196 resolves this issue by subjecting insurance-funded preneed contracts to many of the same requirements and regulations as trust-funded preneed contracts. The Bill spells out the jurisdictional issues by clarifying that the Department of Insurance regulates insurance policies, but the State Board regulates preneed contracts that are funded by insurance.
Activities of Insurance Agents. Last year, several Ohio funeral homes were cited by the State Board for using insurance agents to sell preneed contracts. Many funeral homes felt that the licensing law did not give sufficient guidance as to what insurance agents may or may not do in discussing preneed arrangements with consumers.
SB 196 codifies into law the holdings of an earlier Ohio Attorney General Opinion regarding the activities of preneed insurance agents. The law is now clear that agents may not fill out nor execute a preneed funeral service contract unless the agent holds a funeral directors license. While agents may review price lists with consumers and use a worksheet to estimate the cost of a desired funeral in order to sell a preneed insurance policy, the agent may not offer advice or make recommendations about funeral services.
Consumer Disclosures. SB 196 requires that every preneed contract, whether funded by insurance or trust-funded, must contain a detailed set of preneed contract disclosures. Funeral homes will have to review and revise their preneed contract forms prior to the April 6, 2009 effective date of SB 196 to ensure compliance with the new law.
Portability and Transfer Fees. SB 196 institutes for the first time a requirement that funeral homes transfer irrevocable preneed contract funding to other funeral homes upon the request of the preneed consumer. With the passage of SB 196, Ohio now has full portability. Funeral homes that are requested by a consumer to transfer irrevocable preneed funeral funds and insurance policies must do so within strict time periods. However, if the preneed contract provides for a guaranteed price, the funeral home may charge a cancellation fee or a transfer fee of up to 10% of the value of the trust on the day that it is cancelled or transferred. Cancellation or transfer fees do not apply to insurance-funded preneed contracts.
Corrections to the Right of Disposition Law. When the Right of Disposition law was passed in 2006, it created a priority list of eight classes of individuals who held the right of disposition. However, the list inadvertently omitted grandchildren and public officials who are responsible for indigents. OFDA used SB 196 to correct those oversights and to add grandchildren as the seventh class and public officials as the tenth class in the priority list of those who hold the right of disposition.
As stated earlier, OFDA will be issuing a detailed analysis of SB 196 and the many changes that it will bring for funeral homes in Ohio. In the meantime, if any member has a question, they may contact Scott Gilligan at (513) 871-6332.