FTC Today Announced that it Has Denied a Request for an Exemption from the FTC's Cooling-Off Rule Filed by Seven Life Insurance Companies

The Federal Trade Commission today announced that it has denied a request for an exemption from the FTC's Cooling-Off Rule filed by seven life insurance companies that sell policies to fund pre-need funeral services contracts. In its letter denying the request, the Commission said that the petitioners did not demonstrate any compelling reason to treat the sale of pre-need funeral arrangements differently from other in-home sales.

In June 1995, the American Funeral Assurance Company, Brookings International Life Insurance Company, Forethought Life Insurance Company, Homesteaders Life Company, Pan-Western Life Insurance Company, Pierce National Life Insurance Company, and United Family Life Insurance Company, filed a petition for exemption from the Cooling-Off Rule. They filed the petition not only for themselves, but purportedly for all companies that sell insurance used to fund pre-need funeral service contracts and are subject to state insurance regulations and the FTC's Funeral Rule. The petitioners contend that the practices the Cooling-Off Rule was enacted to prevent do not occur in the in-home sale of policies used to fund pre-need funeral arrangements.

The Cooling-Off Rule, promulgated in 1972, requires a seller of goods or services costing $25 or more, at a place other than the seller's regular place of business, to inform buyers of their right to cancel the sale within three business days and receive a full refund. In addition, the seller must furnish the buyer with a summary of the buyer's cancellation rights, and two copies of an actual cancellation form. In November 1988, the Commission granted exemptions from the rule to sellers of arts and crafts at fairs, and sellers of automobiles at temporary places of business who also have at least one permanent place of business. With the exception of these sales, the rule applies to sales made "at a place other than the place of business of the seller," such as in consumers’ homes or at hotels or other temporary business locations.

When the sale of a pre-need funeral service plan takes place in the consumer's home, or at another location away from the seller's place of business, the Cooling-Off Rule applies. The FTC's Funeral Rule also applies to these transactions. The Funeral Rule ensures, among other things, that consumers have access to itemized price information; that consumers are not required to purchase items they do not want and are not required by law; and that misrepresentations are not used to influence consumer purchase decisions.

In their petition, the companies contend that state insurance laws and regulations governing the sale of pre-need funeral service contracts provide equal or better protection to consumers than the Cooling-Off Rule. They also contend that the Funeral Rule addresses the "same fundamental concerns" as the Cooling-Off Rule, but provides "more comprehensive protections" to consumers. Because they must comply with state insurance laws and regulations, and the Funeral Rule, the petitioners assert that compliance with the Cooling-Off Rule is unnecessary.

After evaluating the request, the Commission determined that the petitioners did not adequately establish a basis for the requested exemption. The Commission also determined that the petitioners did not demonstrate any compelling reason to treat the sale of pre-need funeral arrangements differently from other in-home sales. For these reasons, the Commission has denied the requested exemption.

The petitioners also asked the FTC for a clarification as to whether their transactions constitute the "business of insurance," and should therefore be exempt from Commission regulation under the McCarran-Ferguson Act. The Commission declined to issue an advisory opinion as to the general applicability of the McCarran-Ferguson Act to the sale of policies used to fund pre-need funeral arrangements. The Commission stated that the analysis necessary to making this determination is fact-specific and would be performed only on a case-by-case basis as it became relevant to a particular investigation.

The Commission's vote to deny the request was 5-0.

Copies of the Commission's letter denying the petition are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC Matter No. R511920)