Joint
News Release — Texas Department of Banking
Texas Department of Insurance
Insurance, Banking Departments
Issue Orders on Companies Involved With Pre-Need Funeral Contracts
April 9, 2008
AUSTIN – The Texas Department of Insurance
(TDI) has issued a Hazardous Financial Condition Order for Memorial
Service Life Insurance Company, Lincoln Memorial Life Insurance
Co., and National Prearranged Services, Inc. pursuant to Chapter
404 of the Texas Insurance Code. At the same time, the Texas Department
of Banking (DOB) entered into an Agreed Order with National Prearranged
Services, Inc., to cease selling prepaid funeral benefits contracts
pursuant to Chapter 154 of the Texas Finance Code.
National Prearranged Services (NPS) of St. Louis sells pre-need
funeral contracts in several states and is licensed in Texas by
the DOB to sell insurance-funded prepaid funeral benefits contracts. NPS
has approximately 39,000 insurance-funded prepaid funeral benefits
contracts outstanding in Texas. NPS is a general agent for
Lincoln Memorial Life Insurance Company and Memorial Service Life
Insurance Company. NPS is ultimately owned by a Trust created
by the Cassity family in the state of Missouri.
Lincoln Memorial Life Insurance Company and Memorial Service Life
Insurance Company were placed in supervision by TDI in October
2007. Routine oversight activities by TDI revealed a significant
amount of surrendered transactions by the companies at the end
of 2006. In March 2008, TDI issued an order for the companies to
cease writing new business in Texas. These actions were confidential,
by statute.
The TDI-issued Hazardous Financial Condition Order requires the
companies to establish a plan to pay policyholder claims and to
address existing contracts.
The DOB-issued Agreed Order requires NPS to cease selling prepaid
funeral benefits contracts in Texas. The DOB Order also requires
NPS to take actions to comply with Chapter 154 of the Texas Finance
Code for outstanding contracts and to return all prepaid funeral
benefits contracts and associated payments received since March
17, 2008 to the purchasers. Finally, the DOB Order requires NPS
to initiate actions to remove NPS as the policy beneficiary for
polices issued in conjunction with Texas prepaid funeral benefits
contracts.
“While every effort was made to secure the companies and
return them to normal operations, the decision was made to take
this regulatory action,” said Texas Insurance Commissioner
Mike Geeslin. “As we move forward, our goal is to use every
law on the books to protect consumers, coordinate with other regulators
and states and – most importantly – keep all parties
informed as issues develop.”
“It is imperative that we work closely with NPS and
the funeral providers to ensure all Texas consumers receive their
prepaid funeral goods and services as originally promised,” said
Texas Banking Commissioner Randall James.
TDI, the DOB and regulators in other states will continue to work
with NPS, Memorial Service Life Insurance Company and Lincoln Memorial
Life Insurance Company for a reasonable resolution for consumers
in Texas and elsewhere.
Texas consumers with pre-need funeral contracts funded by insurance
policies written by Memorial Service Life can expect that the policies
will be paid up to the face amount. However, it is unlikely that
funeral providers will receive any additional compensation in the
form of a policy or contract growth payment from NPS which will
affect the 650 Texas funeral homes who have agreed to service the
prepaid contracts as the funeral providers.
Consumers and insurance agents with questions about the status
of a pre-need funeral contract should contact TDI’s Consumer
Protection at (800) 252-3439 or the DOB at (877) 276-5554. Funeral
home operators/agents should direct questions to the DOB.
|
