Pre-need sector sees 20% growth

The pre-need industry is projecting a 20-percent growth this year, as it steps up efforts to win back investor confidence through aggressive marketing and the expansion of distribution channels.

Juan Miguel Vazquez, president of the Federation of Philippine Pre-need Plan Companies Inc., said most pre-need firms are eyeing a 20 percent increase in sales this year on the assumption that the economy will improve.

"I think 20 percent is a safe estimate although the growth of the industry would depend on a lot of things like the economy," Vazquez said.

The pre-need industry has faced difficult challenges in meeting investment objectives based on the assumptions of expected returns under more favorable economic and market conditions.

Some pre-need companies had been affected by the continued slowdown in the property sector and the decline of the stock market. With few investment alternatives, the pre-need investment portfolio has been invested mainly in real estate, listed stocks, treasury bills and government bonds, and bank deposits.

Sales of pre-need plans dropped by 10.08 percent last year to 607,155 from 675,187 in 2001, based on figures collated by the Securities and Exchange Commissionís Non-Traditional Securities and Instruments Department.

An SEC official attributed the decline in the number of plans sold to the current difficult business environment and the controversies that plagued the industry, among which are the trust fund deficiencies of several pre-need plan firms.

Another reason cited was the rising prices of plans. Several pre-need companies increased their rates by 15 to 20 percent as a result of low yield from their investments.

Pension plans accounted for bulk of the sales with 339,105 units sold or 5.36 percent higher than the previous year’s 358,314 units.

Life plans, on the other hand, posted the biggest decline in the number of plans sold last year from 88,989 to 73,074. The value of the sales of these plans likewise slipped to P2.09 billion from P2.68 billion.

Vazquez had earlier projected that the pre-need industry would be recording much bigger growth than the insurance industry over the next four years.