CEBU, Philippines - The financial problems faced by another pre-need company, Prudentialife Plans Inc. (PPI), may not affect the country’s sound financial system, however, business leaders blamed the government’s weak regulation and this should be addressed immediately.
“Prudentialife Plans is outside of the stable banking system. They are really the result of a poor regulation of the pre-need industry by the Securities and Exchange Commission [SEC) in the past aggravated by weak management and investment decision,” said Cebu Business Club (CBC) president Gordon Alan “Dondi” Joseph.
When the country’s pre-need industry almost completely collapsed a few years back, the government should have addressed it seriously. But, until now SEC’s poor regulation on the pre-need industry in the Philippines has continued to further weaken, Joseph said.
PPI announced early this week, that it will stop paying claims to planholders due to financial problems and as ordered by the Insurance Commission (IC).
Based on the IC released order, PPI is prohibited from selling, encumbering, transferring or disposing in any manner whatsoever any of its properties except in the ordinary course of business.
Likewise, PPI is prohibited from making any payment of its liabilities outstanding as of February 6, 2012.
However, in an advisory issued by PPI following the IC order, it assured everyone that the company will assist planholders regarding this matter.
PPI’s problem according to Mandaue Chamber of Commerce and Industry (MCCI) president Eric Ng Mendoza will create negative perception to the country’s pre-need sector, or the insurance industry as a whole, thus there is a need for the government to “isolate them from other insurance firms.”
MCCI board member Glenn Soco also blamed the government’s lax regulation on pre-need players, saying although the country’s financial system in general is strong, the incident projects an impression of government’s inability to effectively regulate the sector.
“This should be addressed effectively to protect the public,” said Soco.
For his part, Prudencio Gesta, past president of the Cebu Bankers Club (CBC) said that the current financial woes experienced by Prudentialife Plans could affect directly the credibility and integrity of the pre-need industry.
Gesta said PPI’s problem may not have a significant impact to the financial condition of the Philippines, since the amount may not be big enough versus the totality of the financial system , aside from the fact that such incident may not be a major factor to determine the soundness of the country’s financial system.
According to IC, they intervene with PPI in order to protect all planholders specially those who have claims that are not yet matured. This move will make the company collect more funds.
In 2009, the SEC ordered to stop selling new pre-need plans making companies to lose incoming funds.
PPI has 200,000 planholders of educational, pension and life plans.