Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-5.011, Florida Administrative Code
Preneed Sales Agent Renewal
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
April 2013
JUSTIFICATION FOR THE RULE
Rule 69K-5.011 implements section 497.466(7), Florida Statutes, regarding the renewal of preneed sales
agent appointments. Preneed sales agents must renew their appointments every 24 months, and in
connection therewith pay the renewal fee.
"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.
Preneed sales agents are persons (individuals) appointed by a preneed licensee to make sales of
preneed contracts for that preneed licensee.
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 an insurance company, and individuals
obtain appointment by the insurance company to make sales for the company. Regarding preneed
sales, businesses obtain a license as a preneed company, and individuals obtain an appointment to make
sales for the preneed company.
Licensed funeral directors may act as preneed sales agents without being appointed by the preneed
licensee. 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 that obtain appointment under the rule.
As shown in the following Statement of Estimated Regulatory Cost, after analysis, this rule does not
reach the threshold test for a Compliance Economic Review.
2
STATEMENT OF ESTIMATED REGULATORY COSTS
On average, approximately 381 preneed sales agent appointments are renewed each year. The renewal
fee is $250, plus an $8 "convenience fee" for use of the DFS on-line renewal system. Thus the typical
aggregate annual direct cost to licensees to renew preneed sales agent appointments is $98,298 (381 x
258), and the estimated 5 year direct cost is $491,490.
Preneed sales agent appointments are renewed on line. The Division estimates that it takes an average
of 5 minutes to renew a preneed sales agent appointment on line. If the value of the time of the person
renewing the preneed sales agent appointment is valued at $20 per hour, the cost to renew an
individual preneed sales agent appointment is $1.66 times 381 preneed sales agents equals $635 per
year; times 5 years equals $3,175.
Thus the aggregate 5-year direct and indirect cost to preneed sales agents to renew their appointments
is estimated to be $494,665 ($491,490 + 3,175).
1. 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 5 years after
the implementation of the rule?
The Division answers the question in the negative. The aggregate 5-year direct and indirect cost to
preneed sales agents to renew their appointments is estimated to be $494,665 ($491,490 + 3,175).
The number of preneed contracts sold in Florida has been rising in recent years:
2011
92,247
2010
95,986
2011
100,889
The number of preneed sales agents licensed in 2011 (821) was 8% higher than were 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 5 years after the
implementation of the rule?
The Division answers the question in the negative. The aggregate 5-year direct and indirect cost to
preneed sales agents to renew their appointments is estimated to be $494,665 ($491,490 + 3,175).
3
Any person coming into Florida to sell preneed must comply with Florida's preneed licensing laws,
including licensing of a preneed sales agent. Conversely, if a Florida-based seller of preneed contracts
wants 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 fairly 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., already 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 5 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 aggregate 5-year direct and indirect cost to preneed sales agents to renew their appointments is
estimated at $267,750. (See economic analysis above).
2. NUMBER AND TYPES OF INDIVIDUALS AFFECTED
Preneed sales agents are natural persons (not legal entities). Division data indicates regarding the
individuals issued a preneed sales agent license in calendar year 2011, 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, and the remainder of the applicants failed to indicate their gender. The
Division considers the 2011 data to be generally typical for recent years.
4
3. 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 for many
years and all staff and resources needed to implement the rule are in place. Because the preneed sales
agent renewals are done on line, the cost to the FCCS Division is negligible.
4. TRANSACTIONAL COSTS
Preneed sales agent appointments are renewed on line. The Division estimates that it takes an average
of 5 minutes to renew a preneed sales agent appointment on line. If the value of the time of the person
renewing the preneed sales agent appointment is valued at $20 per hour, the cost to renew an
individual preneed sales agent appointment is $1.66 times 381 preneed sales agents equals $635 per
year; times 5 years equals $3,175.
5. ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The aggregate 5-year direct and indirect cost to preneed sales agents to renew their appointments is
estimated at $267,750. (See economic analysis, above).
The applicants for preneed sales agent license under the rule are not small businesses, and are instead
individuals who will typically 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.
METHODOLOGY USED TO CONDUCT THE ANALYSIS
Hourly rates for state personnel were calculated from actual salaries paid to those personnel. The $20
per hour for staff time of industry personnel is an estimate of the average composite cost of various
grades of staff that must spend some time on the task for the licensee. This composite was calculated
from knowledge of the industry. For example, to prepare a financial statement will require work and
review at multiple levels by staff of increasing responsibility, skill and compensation level. Low level
accounting clerks will assemble the data and prepare rough versions of the statements. These will be
passed to a person who is an accountant with a college degree and possibly professional licensure, who
will finalize the statements and endorse them and send them up the chain, where they will get reviewed
at one or two additional levels on the finance side of the firm. Frequently they will then cross over to
the firm’s legal staff for review of issues that may have potential legal/regulatory compliance impacts.
Some of these higher levels of staff may be compensated at $80 to $100 per hour.
The Division maintains a database from which it has extracted reliable data as to number of licenses
issued or renewed per year and other pertinent data. The Division has staff that has 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
5
herein. The Division has diligently collated and applied all of said data to produce the good faith
estimates of regulatory costs presented herein.
6