Roxas pushes stricter rules for pre-need firms

Sen. Manuel Roxas is pressing for stringent changes in the rules governing pre-need firms to avoid financial problems and regulatory issues now hounding the industry.

Roxas, chairman of the Senate Committees on Trade and Commerce and on Economic Affairs, underscored the need to review the investment portfolio mix for trust funds to ensure the liquidity and capital growth of pre-need companies.

At present, real estate and equity investments are limited to 25 percent each in trust fund equity. Direct loans, on the other hand, are confined to five percent while commecial papers restricted to 15 percent.

Roxas also said sought strict prohibition on DOSRI loans to avoid co-mingling of funds.

He also proposed a law penalizing trustees or officers of pre-need companies who engage in "self-dealing" to the detriment of thousands of planholders under their care.

Under Senate Bill 1896, Roxas wants up to 12 years in prison plus a fine of up to P1 million for a pre-need company trustee or officer found using money from the trust fund to extend any loan to, or invest in any other entity directly or indirectly controlled by, the pre-need firm’s directors, officers, stockholders or related interests (DOSRI).

An oversight committee of the Securities and Exchange Commission (SEC) had attributed the financial distress of College Assurance Plans Inc. (CAP), the country’s largest pre-need provider with over one million planholders, to the alleged self-dealing of its controlling owners and officers.

Roxas said payments made by planholders must be deposited to the trust fund first before paying commissions. He said most of the financial outflow goes directly to commissions and operations, which are not helpful moves to protect the planholders.

Pre-need companies are required to deposit in a trust fund a minimum of 51 percent of their collection or such higher amount as may be determined by the actuary.

Roxas also reiterated the creation of a planholders protection fund. Under his proposed measure, affected planholders may claim up to P100,000 each from the fund which shall pay all claims within six months of filing.

The proposed bill also requires pre-need firms to contribute an initial P1 million each to the fund. A contribution then of one-half of one percent of total payments made on existing plans shall be remitted quarterly to the fund. Any income generated by the fund shall remain with the fund.

Pre-need plans are contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, and interment.