Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-5.003, Florida Administrative Code
Application for Registration of a Preneed Sales Agent
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
March 30, 2012
JUSTIFICATION FOR THE RULE
Section 497.466, Florida Statutes, requires the licensing of preneed sales agents. The
statute requires, among other things, submission of fingerprints and criminal
background checks. The statute requires that an application fee be imposed by rule,
not to exceed $300. Rule 69K-5.003 implements the statute in specifying forms,
procedures, and the fees applicable to licensing under the statute. The rule is in effect
mandatory because the statute could not be implemented without a rule specifying
forms, procedures, and fees.
"Preneed sales" refers to the purchase by a person, before their death, of services and
merchandise to be used after the person dies, for the final disposition of the person's
bodily remains. For example, this might include funeral director services, embalming,
viewing of remains, casket, burial service, headstone or other grave marker, or
alternatively, cremation service.
One of the most important reasons for licensing preneed sales agents is that as part of
the application process, they are required to submit fingerprints and a criminal
background check, which is obtained by the Division. Applicants with criminal records
may be denied licensure. Preneed sales agents often deal with the elderly who are
seeking to purchase a preneed contract because they see the end of life approaching
and want to protect their children from the cost of final disposition. The preneed sales
agents may on occasion even make sales calls at the potential customer's home.
Preneed sales agents are in a position to take advantage of the elderly.
In addition, licensing preneed sales agents and requiring that they be appointed by the
preneed company provides a trail of accountability to lead back to the preneed company
responsible for honoring the preneed contract. Without this licensing structure, preneed
companies would be better situated to deny that the preneed sales agent had authority
to represent the preneed company, and thus the preneed company could deny
responsibility to honor the preneed contract.
Because preneed sales by their nature involve payment now in exchange for a promise
by the seller to perform years later, preneed sales have long been significantly
regulated for the public good. See, for example, the regulation of preneed sales in
1953, at Chapter 639, Florida Statutes (1953). The Division estimates that
approximately 95% of all states regulate preneed sales, including preneed sales agents.
The regulatory scheme regarding preneed sales resembles in some regards the
regulatory scheme for insurance sales, in which insurance companies obtain a license
as a insurance company, and individuals obtain licensure as insurance agents, and are
then "appointed" by the insurance company to make sales for the company. Regarding
preneed sales, businesses obtain a license as a preneed company, and individuals
obtain a preneed sales agent license and are then appointed to make sales for the
preneed company.
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The applicable statute specifies that a licensed funeral director may sell preneed without
obtaining additional licensure as a preneed sales agent. Some preneed companies sell
their preneed exclusively or primarily through licensed funeral directors they employ.
However, many preneed companies desire a sales volume in excess of that which can
be achieved by relying solely on funeral directors they employ. These preneed
companies employ the preneed sales agents who obtain licensure under the rule.
STATEMENT OF ESTIMATED REGULATORY COSTS
ECONOMIC ANALYSIS
In calendar year 2011, approximately 821 new preneed sales agent licenses were
issued. That number is typical for recent years. Under rule 69K-5.003, the fee for each
preneed sales agent license application is $250. This is the direct cost to the applicant.
It is estimated that it will take .75 hours for an applicant to fill out the application and
deposit it in a mail box to be delivered to the Division. The value of the applicant's time
is estimated at $12 per hour, resulting in a cost of $9 to fill out the application and
deposit it in a mailbox. It is estimated that postage and the cost of an envelope add
$1.00 to the cost. Therefore, the total estimated cost per year is $260 ($250 + $9 + $1)
per applicant. The cost per applicant is multiplied by 821 applicants, equals $213,460
per year, times five years equals $1,067,300 in aggregate over five years.
Direct or Indirect Economic Impacts
Is this rule likely to have an adverse impact on economic growth, private sector job
creation or employment, or private sector investment in excess of $1 million in the
aggregate within five years after the implementation of the rule?
The Division answers this question in the negative. The number of preneed contracts
sold in Florida has been rising in recent years:
2009 92,247
2010 95,986
2011 100,889
The number of preneed sales agents licensed in 2011 (821) was 8% higher than the
number licensed in 2010 (760). The growth in the number of preneed contracts sold,
and the number of preneed sales agents licensed, indicates a healthy preneed industry
in Florida, especially considering the severe recession over the last three years.
Is the rule likely to have an adverse impact on business competitiveness, including the
ability of persons doing business in the state to compete with persons doing business in
other states or domestic markets, productivity, or innovation in excess of $1 million in
the aggregate within five years after the implementation of the rule?
The Division answers this question in the negative. Any persons coming into Florida to
sell preneed must comply with Florida's preneed licensing laws, including licensing of
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preneed sales agents. Conversely, if Florida based sellers of preneed contracts want
to sell preneed contracts in another state, they must comply with the law in that other
state, not Florida law (if the other state does not require use of licensed preneed sales
agents, the Florida based seller does not need to use a licensed preneed sales agent in
the other state).
Market forces tend to make preneed sales a "local" business. Competition is typically
limited to establishments and cemeteries in the buyer's county of residence and
contiguous counties. It is simply in the nature of things that a person arranging their
funeral and burial on a preneed basis will usually want to use a near-by funeral home
and cemetery. The funeral home and cemetery need to be fairly convenient to their
loved ones who will be involved in the funeral service and cemetery interment. The idea
of having their remains shipped long distances to some remote and unknown funeral
establishment and cemetery, simply for a price advantage, is not typically attractive to
buyers of preneed contracts. If the person already has a spouse, child, parent, etc.,
buried in a particular cemetery, that will usually drive the choice of the cemetery. If a
person has had a good experience in a particular funeral home regarding the funeral
services of another person, particularly a family member, that will typically have a very
strong influence on the purchase of a preneed contract. Although cremation tends to be
somewhat less of a "local" business, even regarding preneed contracts for cremation,
there is typically significant consumer resistance to having their remains shipped long
distances to unknown facilities for cremation. Thus, generally speaking, preneed sales
tend to be a "local" business.
Sales of preneed contracts to Florida residents over the internet by sellers outside
Florida have not to date been a significant component of preneed sales in Florida. Any
increase of such internet sales by out-of-state sellers is expected to be slow, because
the preneed sales tend to be a "local" business (see discussion above).
Is the rule likely to increase regulatory costs, including any transactional costs, in
excess of $1 million in the aggregate within five years after the implementation of the
rule?
The Division answers this question in the negative. The fees and transactional costs
identified in this Compliance Economic Review have been in place for years, so no
additional cost will result. The continued enforcement of the rule will result in estimated
aggregate regulatory costs over five years of $1,067,300. See economic analysis,
supra.
NUMBER AND TYPES OF INDIVIDUALS AFFECTED
Approximately 821 persons applied for a preneed sales agent license in 2011. Division
data regarding the individuals issued a preneed sales agent license in calendar year
2011, indicates the median year of birth was 1961 (age 51); approximately 313 of the
preneed sales agent licenses issued were issued to females; 295 were issued to males;
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and the remainder of the applicants failed to indicate their gender. The Division
considers the 2011 data to be typical for recent years.
COST TO THE AGENCY, AND TO ANY OTHER STATE AND LOCAL GOVERNMENT
ENTITIES, OF IMPLEMENTING AND ENFORCING THE PROPOSED RULE, AND ANY
ANTICIPATED EFFECT ON STATE OR LOCAL REVENUES
There will be no additional costs to the Division to enforce the rule. The rule has been
in effect since 2007 and all staff and resources needed to implement the rule are in
place. The Division estimates that it takes on average approximately 30 minutes for
Division staff to process an application under the rule. If the value of staff time is
estimated at $15 per hour, the cost to the Division to process the 821 applications
received in 2011 is $6,157 for calendar year 2011, and in aggregate $30,787 for a fiveyear period.
TRANSACTIONAL COSTS
Under rule 69K-5.003, the application fee for each preneed sales agent license
application is $250. This is the direct cost to the applicant. It is estimated that it will
take .75 hours for an applicant to fill out the application and deposit it in a mailbox to be
delivered to the Division. The value of the applicant's time is estimated at $12 per hour,
resulting in a cost of $9 to fill out the application and deposit it in a mailbox. It is
estimated that postage and the cost of an envelope add $1.00 to the cost. Therefore,
the total estimated cost per year is $260 ($250 + $9 + $1) per applicant. The cost per
applicant is multiplied by 821 applicants, equals $213,460 per year, times five years
equals $1,067,300 in aggregate over five years.
ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The applicants for preneed sales agent licenses under the rule are not small
businesses, and are instead individuals who will be employees, not employers. Many of
the persons licensed as preneed sales agents are subsequently employed by a small
business, but the small business is not required by the statute or rule to pay the
preneed sales agent application fee or other transactional costs of the individual in
obtaining the preneed sales agent license. However, the Division estimates that small
businesses pay the preneed sales agent license application fee for approximately 90%
of the preneed sales agents who will be employed by them. The small business does
this voluntarily, as a business decision, and not due to a regulatory requirement.
Therefore, the Division does not believe that such costs incurred by the small business
are properly attributable to the rule. However, if such costs are attributed to the rule, the
total aggregate five-year costs to all affected small businesses is estimated at $923,625
(90% times 821 = 739; times $250 application fee = $184,725 per year; times five years
= $923,625).
ANY ADDITIONAL INFORMATION THAT THE AGENCY DETERMINES MAY BE
USEFUL
The Division of Funeral, Cemetery, and Consumer Services is not aware of any
additional information that may be useful in evaluating this matter.
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REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives have been submitted.
EXPLANATION OF THE METHODOLOGY USED TO CONDUCT THE ANALYSIS
The Division maintains a database from which it has extracted reliable data as to
number of licenses issued per year, date of birth of applicant, and other pertinent data.
The Division has staff who have extensive experience in deathcare industry regulation
and, to a significant extent, the economics and empirical characteristics of deathcare
industry businesses, particularly deathcare industry licensees. The Division has
informally queried deathcare industry members for their input on issues or questions
pertinent herein. The Division has diligently collated and applied all of said data to
produce the good faith estimates of regulatory costs presented herein.
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