Six Feet Under and 40 New Laws
Missourinet covers the continuing drama of the pre-need funeral scandals (seriously, what a bizarre thing for a scandal). It seems the summer will be spent in a series of investigative hearings designed to disentangle the issue:
The state has gotten an agreement with National Prearranged Services to suspend all sales of pre-need contracts in Missouri….and has gotten a consent order with the parent company, Lincoln Memorial Life, to stop manipulating the trust funds without telling those buying the plans.
For a quick refresher, prepaid funerals allow households to set aside money for funeral expenses with an insurance broker. Brokers are then legally required to set aside the money in a trust fund, but they maintain rights to 20 percent of the total amount, in the event of cancellation or other changes. Apparently, unscrupulous insurers haven’t been doing their duty and have skipped town with large sums of their clients’ funds. In April, Nick, our former-intern-turned-law-student, argued:
While we advocate free-market solutions here at the Show-Me Institute that shy away from extensive government interference, I don’t think anyone can reasonably claim that a market with a definite and defined end is truly free, and I hope stronger legislation can be put in place to protect consumers of these unique services.
First of all, better laws aren’t the problem. Enforcing the existing laws is the problem. Whenever a scandal erupts, the gut reaction is to legislate because at least it creates the pretense of doing “something.” But if insurers broke the existing laws, what makes anyone think that they won’t do the same thing with news laws? Not only will we face the same problem, but we’ll invite greater government intrusion into our lives.
Second of all, prepaid funerals are a colossally stupid idea. You could just set aside $1,000 in a savings account for 40 years and have more than enough to pay for a funeral. Plus, you’d have the freedom to do whatever you wanted with that money, without penalty, in the event that you decided not to use it for a funeral. Unless there’s some kind of great tax benefit or significant funeral discount for a prepaid plan, I see no reason not to use a savings account instead. Really, I think David said it best in one of his previous posts:
If agreements are not being honored, then the companies should be prosecuted. But that should not serve as a jumping-off point for more laws or more control. […]
Just because something may be a bad deal […] should not automatically be a reason for the government to jump in to protect us from ourselves. This is the type of reaction that leads to the ever-expanding role of government in our lives.