Protecting pre-need planholders and investors
ANGARA: PRE-NEED CODE SET FOR BICAM THIS SEPTEMBER

Senator Edgardo J. Angara renewed his calls and urges for the urgent passage of the pre-need code to regulate pre-need companies and, more importantly, to protect the interests of planholders and this he said would provide the pre-need industry its much needed lift.

"It is imperative that we ensure that funds of these preneed companies meet the long-term promises of the contracts. The government has to make sure that preneed firms are able to maintain sufficient funds to cope and comply with their contracts," said Angara who chairs the Senate Committee on Finance.

He added, "the preneed sector is a vital part of the national economy, and it has yet 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 in turn could protect the public who invest in these preneed companies."

"The deregulation of tuition fees in 1992 resulted in the unforeseen tremendous increase in the obligations of preneed companies," Angara said. "Another factor that contributed to the problem is bad management and investment decisions made by preneed companies. These actions have not been properly regulated by the SEC for a long time, in view of the lack of funding and regulatory framework for the industry. That is what we hope to change," he continued.

Angara explained that there are close to four million planholders today and that the trust fund alone totals 66 billion pesos. Angara also noted that a total of 92 preneed firms have been registered for the last 25 years. In 2005, however, the number of preneed companies licensed to operate suddenly went down to 32.

Recent data, however from the Securities and Exchange Commission (SEC) showed the deterioration of public confidence on the preneed industry has significantly affected its sales. 2007 total sales declined to P18.9 billion from P19.8 billion in 2006 and P20.5 billion in 2005.

Data show that during the first 10 months of 2008, industry sales dwindled another 20.8 percent representing a decline to P12.7 billion from 2007's figure of P16.05 billion. In the same period, education plan sales alone plunged 51.8 percent amounting to more than P1 billion in sales. Sales dropped to P1.59 billion in 2008 from P3.3 billion in the first 10 months of 2007.

Based on the findings of the Banks Panel, Angara said that the major factor that caused the failure of some companies is the issuance of traditional educational plans, which consists of 21 percent of the total number of plans sold as of 2003.

Angara said that under a traditional educational plan, the issuing preneed company guarantees the payment of the actual cost of services promised regardless of the increase from the originally assumed values.

"Most of these investors and planholders are risking large sum of their savings and hard-earned money in the preneed industry and there is a consensus from us that we need to protect their rights. I hope we can do this by expeditiously enacting a Preneed Code into law," ended Angara.