‘Pre-Need’ Code needed now, not later!

While the attention of almost everybody has been drawn into the controversial jueteng payola investigations by the Executive Branch, by the police, and especially in both chambers of Congress, it was greatly appreciated that some people were still at least focused on addressing equally urgent and more important national issues and concerns.

In particular, the Senate committee on banks, financial institutions and currency, chaired by opposition Sen. Edgardo Angara, finally started this week the public hearings on four similar proposed bills that seek to establish a "Pre-Need Industry Act of 2005."

The bills were filed separately by Senate president Franklin Drilon, Senators Manuel A. Roxas II, Sen. Sergio Osmeña lll, and Angara.

The proposed bills seek to come up with a special law to regulate pre-need companies as differentiated from insurance business.

Counterpart proposed measures were also filed at the House of Representatives which, through its committee on oversight, conducted a public hearing last May 26 on the implementation of the "harsh" Actual Reserve Liability (ARL) rules that threaten to cripple the Philippine pre-need industry.

The proposed law was the offshoot of the financial debacles that hogged the limelight one after the other involving two major educational pre-need companies, the College Assurance Plan (CAP) and Pacific Plans Inc. (PPI).

With classes in all levels to start this coming Monday, Congress’ finally setting into motion the legislative mills on the proposed measure was certainly a welcome relief on the zarzuela and circus shows on the jueteng probes.

I’m very sure many parents like me are fervently hoping that both chambers of Congress would continue in earnest to expeditiously do their best in the passage into law of this measure to really safeguard the future of our children’s educational needs.

Despite differing versions of the bills filed, there is a crying need to ensure arm’s length transactions between pre-need companies and their trustee banks as well as more stringent prohibitions to prevent DOSRI (directors, officers, stockholders and related interests) transactions.

All four Senate bills look at the possible creation of a planholder’s protection fund against which planholders may claim in case of insolvency or temporary financial problems of pre-need companies as experienced by CAP and PPI and prevent the recurrence of bouncing checks which CAP and PPI planholders paid for their children’s tuitions this year.

It is noteworthy to mention Angara’s assurance that his committee would come up with "solid and fool-proof" protection scheme in the form of a reimbursement scheme or the equivalent of a money-back guarantee" to shield planholders from the financial troubles of pre-need firms.

What could have been a generally acceptable proposed law suffered a complication though when politics reared its ugly head anew at the Senate.

Osmeña, Angara’s fellow opposition member, filed last Wednesday a Senate Resolution asking the Senate leadership to conduct a separate inquiry into the alleged "excesses" of pre-need firms.

Specifically, apparently due to the current rift among the Senate minority bloc, Osmeña wants to take out his proposed bill out of Angara’s committee.

Osmeña wants his measure be referred instead to the committee on trade and commerce, chaired by Roxas, as the primary committee, and to the committee on social justice, welfare and rural development which he himself is the chair.

For all intents and purposes, while his move obviously smacked of politics, Osmeña’s tantrums on this proposed law would only delay the implementation of much needed reforms in this very vital pre-need industry which hold an estimated trust fund amounting to as much as P66 billion.

The proposed law would sort of become the Code that would govern the business of pre-need companies in the Philippines which are currently regulated by the Securities and Exchange Commission (SEC).

But at present, the SEC has lumped pre-need companies together with insurance firms which, although also dealing with future financial needs, have totally different clientele and business.

The pre-need industry found an ally in the person of SEC Commissioner Jesus Enrique Martinez who testified at the House hearing on the dire need to correct, through remedial legislation, this "flawed" policy of the past SEC that has been handed down to the present SEC leadership headed by chairperson Fe Barin.

The ARL rules are considered to be at the heart of the problems presently plaguing the country’s pre-need industry.

The ARL is technically an accounting rule implemented by the SEC in 2002 whereby predicted possible liabilities that may or may not happen 30 years hence have to be reflected by pre-need companies in their present financial reports.

The policy issue on ARL is crucial to the industry and the planholders themselves. In spite of the ARL, to CAP’s credit, the company has paid last second semester a total of P423 million to its planholders.

And CAP did not take the easy way out by going to court to ask for suspension of the payments.

The PPI, on the other hand, led by its majority owner, former ambassador Alfonso Yuchengco, shelled out part of his own fortune amounting to P250 million to pay for the maturing educational plans of his pre-need company.

What is more disturbing, Martinez alerted the solons about the Pre-Need Uniform Chart of Accounts (PNUCA), said to be an Agile-inspired study on which the SEC formulated its new guidelines on computing the ARL.

Further fueling the suspicions prevailing in some quarters is this could be part of an insidious plot by big American insurance companies to undermine the very profitable operations of Philippine pre-need business.

While we’re now in a seamless, globalized trading regime, commonsense though calls upon Filipino lawmakers to protect our very own pre-need industry. We need this Pre-Need Code now, not later.

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E-mail Commonsense at [email protected]