Missouri insurance regulators say they think they are better positioned than the state’s attorney general to help the customers of a troubled funeral insurer.

The Missouri Department of Insurance, Financial Institutions & Professional Registration has refused to let the office of Missouri Attorney General Jay Nixon take legal action against National Prearranged Services Inc., Clayton, Mo., and the company’s life insurance affiliates.

NPS is affiliated with Lincoln Memorial Life Insurance Company and Memorial Service Life Insurance Company, officials say.

Taking legal action against NPS may hurt consumers and local funeral home directors, a Missouri insurance department representative says.

“Our main goal is to ensure customers get what they paid for by making sure there are assets available to pay consumers for the services they paid for,” the representative says.

Representatives from NPS and its affiliates were not immediately available to comment on the settlement agreement.

NPS and its affiliates have promised to provide $1 billion in funeral benefits for about 150,000 customers, according to Texas insurance regulators.

Regulators in Texas, Missouri and elsewhere say they believe NPS and its affiliates have run into financial trouble and, in some instances, had consumers replace permanent whole life funeral insurance policies with term life policies with no cash value.

The Texas Department of Insurance has placed Lincoln Memorial Life, Memorial Service Life and NPS into receivership with the consent of those companies’ representatives, according to Texas officials.

The Missouri Board of Embalmers and Funeral Directors has revoked NPS’ pre-need seller registration.

In May, Lincoln Memorial Life accepted a consent ordered negotiated with the Missouri insurance department that called for the company to reverse some of the transactions involving the replacement of whole life policies with term life policies, Missouri officials say.

Lincoln Memorial also agreed to give regulators access to the records necessary to fulfill the consent order, officials say.

In June, Nixon sued some funeral insurance marketing organizations that he identified as being affiliated with NPS.

Nixon issued a press release noting that he needed permission from Missouri insurance regulators to sue insurance companies and asking the regulators to let him proceed.

The Missouri insurance department told Nixon that it will not authorize legal action because all regulatory steps have been taken.

The department fears that litigation by the attorney general’s office against insurance companies or financial institutions could have a detrimental effect on a plan being developed by a special deputy receiver and insurance guaranty associations to provide added protection for Missouri consumers and funeral directors, Missouri officials say.

Linda Bohrer, acting director of the Missouri department, writes in a letter to Nixon that the department is working to draft legislation to prevent future similar situations from occurring in the future.

Bohrer says the department also is:

- Conducting an audit investigation, looking into suspected violations of Missouri’s insurance and pre-need funeral contract laws.

- Investigating a 1994 consent judgment obtained by Nixon that my have contributed to the financial woes of NPS and Lincoln Memorial.

- Working with the special deputy receiver and insurance guaranty associations to protect known assets and find other assets.

- Requiring Lincoln Memorial Life to reverse business transactions to protect pre-need contract holders

Litigation may be warranted at a later time but if attempted now would shift the focus of the special deputy receiver and insurance guaranty associations, Bohrer says.