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Jeff Sampson, owner of Clark-Sampson Funeral Home of St. Joseph, says the prearrangement problems some people are having are due to third-party contracts.

Area funeral home directors and customers are worried they may not get what they paid for in funeral arrangements.

National Prearranged Services, a company that sells pre-need funeral contracts, and its sister company, Lincoln Memorial Life Insurance Co., are under heavy scrutiny by several state agencies.

The Missouri Board of Embalmers and Funeral Directors, the Missouri Attorney General’s office and the Missouri Department of Insurance are all looking into how the companies replaced pre-need contracts with term insurance policies without consent of the trustee.

A pre-need contract is an arrangement which requires current payment of money for future delivery of funeral or burial services. All funds in a pre-need trust must be invested by the trustee.

“NPS is like a third party, and that’s where the problem was,” said Jeff Sampson, owner of Clark-Sampson Funeral Home of St. Joseph. “It’s not the funeral homes’ fault, and it’s not the (customer’s) fault.”

The Insurance Market Regulation Division of Missouri has requested that Lincoln Memorial refund all premiums paid for term life insurance policies in which a term policy was the only type of policy issued. The division is asking that the Department of Insurance seek monetary penalties and payment of investigation costs.

A hearing will be held May 12 in Jefferson City to discuss what action, if any, will be taken.

The companies agreed to suspend all sales in Missouri on April 9. It made similar arrangements with Texas and other states as regulators try to decipher the St. Louis-based company’s ability to fulfill its contractual obligations.

NPS stated on its Web site that the insurance companies are paying claims.

“It is the goal of industry regulators and new management of the companies to ensure all consumers receive payments for their prepaid funeral goods and services,” they stated.

Doug Ommen, director of the Missouri Department of Insurance, ordered Lincoln Memorial on Wednesday to reverse previous business transactions to protect the financial security of consumers who have purchased pre-need contracts from National Prearranged Services.

Lincoln Memorial also made loans to NPS which were secured by the cash value and benefits of one or more of the whole life insurance policies without securing the consent of the pre-need trustee. The insurance company made such replacements and loans without notifying policyholders.

The situation is causing concern among some local customers who bought pre-need contracts.

“It just makes me sick that people are doing this to us,” said Lucille Niljavic.

The St. Joseph woman only recently found out about the problems with NPS and Lincoln Memorial but said she was reassured by a local funeral director that it shouldn’t affect the arrangements she’s made for herself and her husband.

“I don’t even know what’s going to happen to the company,” Mr. Sampson said. “It’s not going to affect the people. They’ll still get what they need, but no one knows what we’re going to get as far as payment is concerned.”

The attorney general’s office was called in to investigate when the Department of Insurance called them.

“We are a complaint-driven system,” said John Fougere, press secretary for the attorney general. “The board and its entities are continuing to look into the NPS situation. It is ongoing and as such, we cannot predict what the ultimate outcome will be.”

Business reporter Jennifer Hall can be reached at jennhall@npgco.com.