ANGARA PUSHES FOR THE PROTECTION OF PLANHOLDER'S INTEREST

Senator Edgardo J. Angara today called for the promotion of a comprehensive Pre-Need Code as a key to ensure the protection of the interests of planholders.

"The pre-need sector is a vital part of the national economy, and it has to realize its full growth potentials. The regulatory framework, in turn, will provide the environment that will allow the pre-need firms to be stronger, bigger, and more stable so that we would avoid the same problems in the future," said Angara, who chairs the Senate Committee on Banks and Financial Institutions.

At the height of educational plans controversy in 2005, pre-need companies encountered extreme problems that they cannot even meet current tuition fee payments. In addition, some companies even posted trust funds lower than their actuarial reserve liability (ARL).

ARL determines the firm's ability to ensure that there will be enough money in their fund to cover payments to clients as embodied in their respective contracts.

"There is a great need to protect the planholders while at the same time saving the pre-firms, being equally vital in helping the government in giving hopes to families of lower income bracket who avail of these pre-need services," said Senator Angara.

Under the Pre-Need bill, a pre-need company shall have a minimum paid-up capital of P100 million. Existing pre-need companies with traditional education plans shall also have the same minimum unimpaired paid up capital. Moreover, a pre-need company is given a grace period of at least 60 days to pay unpaid installments on pre-need plans.

To determine the sufficiency and adequacy of the Trust Fund of a pre-need company, an annual valuation of ARL as of valuation date shall be made within 105 days from the end of the calendar year. It must contain the actuarial assumption, methodology and results.

The trustee shall also maintain a liquidity reserve which shall cover at least 15% of the Trust Fund but shall in no case be less than the amount of the benefits payable in the succeeding year.

As of January 2007, the Securities and Exchange Commission (SEC) reported that there are 29 existing pre-need companies with dealers' license within the country.