Angara panel set to endorse proposed Pre-Need Code

The Senate committee on banks, financial institutions and currencies is set to recommend a regulatory reform measure strengthening the troubled pre-need industry as well as safeguard the interest of planholders.

Sen. Edgardo Angara, chairman of the committee, said his committee is now in the process of coming up with a committee report recommending the institutionalization of regulatory framework for pre-need industry aimed not only at preventing a repeat of the crisis of the pre-industry and its clients, but to provide them relief from the crisis of the moment, as well.

Aside from measure securing the interest of planholders, Angara said his committee is seriously considering the adoption of measures designed to allow pre-need companies more elbow room in overcoming the adverse economic situation.

Angara was referring to legislation adopted by the Japanese Diet allowing insurers threatened by insolvency to break their contracts with clients and lower the interest rates they had guaranteed to pay out on polices.

He said cutting guaranteed rate of return, insurers including those engaged in pre-need services, such as educational plans, could stay in business.

"This is one of our recommendations when we come up with our committee report," said Angara, who presided in a series of public hearings on the circumstances surroundings the insolvency problems being experienced by College Assurance Plan (CAP) and Pacific Plans, Inc. (PPI).

Angara also cited the United States Pension Prevention Act of 2005 which entitles underfunded pension plans to get relief for three years, allowing traditional "defined benefit" pension plans to assume a more generous return on investments based on an index of high-grade corporate funds, rather than the current formula based on a 30-year US Treasury bond yields.

"We are seriously studying these options for the purpose of not only of safeguarding the interest of planholders but also on how to reinvigorate the troubled pre-need industry," Angara said, in an interview.

Angara’s statement came after the Securities and Exchange Commission disclosed earlier that it has been monitoring the operation of 12 pre-need firms that have offered traditional educational plans to prevent more industry players from ending up like the CAP’s or PPI’s situation.

Besides the troubled CAP and Pacific Plans, the other pre-need firms being monitored by SEC are Eduplan Philippines, Inc., Eternal Plans, Inc., Legacy Consolidated Plans, Inc., PET Plans, Inc., Platinum Plans Philippines, Inc., Pryce Plans, Inc., TPG Corp., Trusteeship Plans, Inc., and Scholarship Plans Phils. Inc.

SEC records showed that the CAP offered 596,426 traditional educational plans with a contract price of P20.9 billion, while Pacific Plans only have 33,144, with a contract price of almost P1.3 billion. Platinum Plans, on the other hand, issued 49,122 traditional plans, with a contract price amounting to P920.4 million.