Solons urged to pick agency for pre-need sector

The Securities and Exchange Commission has asked lawmakers to exercise due diligence in picking the appropriate regulatory agency to supervise the multi-billion peso pre-need industry.

Since the SEC started regulating the pre-need industry in 1978, the question of what agency should regulate the industry has been a recurring one.

A long list of legislative proposals before Congress, either favor the SEC or the Insurance Commission (IC) to oversee the multi-billion peso pre-need industry.

Other lawmakers have proposed the establishment of a new regulatory body that will have exclusive jurisdiction over the pre-need industry and amid the financial difficulties being experienced by several pre-need firms. They said pre-need supervision should belong to another government agency since the SEC should concentrate on capital market development.

Some lawmakers have argued that a pre-need plan is an insurance contract, and, therefore, regulation should be transferred to the IC.

Foreign consultants belonging to the Accelerating Growth through Investments and Liberalization with Equity (AGILE), on the other hand, recommended that the appropriate regulatory agency should apply "prudential" not "prescriptive" regulation and should be regulated by the SEC.

The SEC uses both the full disclosure and prudential approach in protecting investors. With full disclosure, investors are provided with material information about the company and the security being offered to enable them to make informed investment decisions.

The IC, on the other hand, uses prescriptive regulation. This approach involves detailed centralized control under which the IC supervises decision-making for each insurer, taking on a quasi-managerial role through statutory provisions and regulations and close monitoring of compliance.

In a position paper submitted to the House, the SEC said "whatever is the legal nature of a pre-need plan, Congress has the power to decide what appropriate agency should regulate the pre-need industry as it has done with respect to insurance contacts and the like."

"If a change in regulatory agency is envisioned, particular attention should be focused on the regulatory requirements of the industry; the regulatory orientation desired; and the organizational aptitude and competency of the regulatory agency," the SEC said.

The Federation of Pre-need Plan Companies, for its part, said Congress should be circumspect in supporting a shift in regulator to the IC, which has the practice of limiting the earnings to policyholders and turning over excess profits of the investments made to the company.

It has asked Congress to let the pre-need industry remain under the SEC which for the past 38 years has provided the regulatory rules under which it operated and flourished.