Pre-need firms brace for stiffer rules in wake of present woes

The pre-need industry is bracing itself for stiffer regulations in the wake of financial problems encountered by Pacific Plans Inc. and the College Assurance Plans Inc. (CAP).

"We are expecting such new rulings as high capital base requirements, more transparency in the trust funds, and stiffer rules on the use of the premiums paid by planholders," a top executive of a pre-need company who asked not to be named, said.

The pre-need company official recommended that the premium payments of planholders should go directly to the trust fund, while another recommended that more than 80 percent of the premiums payments should go directly to the trust fund and only 20 percent can go to operations.

Aside from Pacific Plans and CAP, there were three to four other players that had also marketed open-ended education plans were reportedly having similar difficulties as these were insufficiently funded, the pre-need executive said.

"The industry as a whole is healthy, but there are a few players that need assistance," the industry source said.

Several top industry players have recommended that the Securities and Exchange Commission (SEC) should consider "urging some troubled players in selling their plans to other players and consider closing shop, much like the way the insurance industry saves their planholders."

They added that incentives could be offered by the SEC for mergers or acquisitions much like the way the Bangko Sentral ng Pilipinas (BSP) is doing in the banking sector.

There are presently some 40 players in the country’s pre-need industry, a huge decrease from over a hundred at the peak of the industry’s growth in the late 1990s.