Parallels: Pork barrel, insurance, pre-need scams

This column’s August 17 piece (“Insurance Commission remiss in regulating pre-need firms”) has elicited more reader reactions.  Let me cite just two:

• Leah Valientes rails against the Philippine Prudential Life Insurance Co., owned by the family of the late “businessman-philanthropist” Daniel L. Mercado Sr., run by his son, Daniel Jr. (chairman) and grandson Gregorio D. Mercado (president).

She claims that PPLIC (different from the Prudentialife Plans, Inc., now under liquidation order) unjustly terminated the policies of 4,000-plus policyholders under a “protector account” ­— involving P261 million in paid premiums — due to a “technical clause” in the firm’s Group Life Master Policy.

Insurance Commissioner Emmanuel Dooc, she adds, promised in 2010 that the IC would closely monitor the firm and would revoke its license should it continue its “deceptive” marketing practice. No action until now.

•  From T.C: “I have a Prudentialife education plan for my daughter and a Pryce education plan for my son and I can’t avail of them… These insurance companies are just like a legal Ponzi scheme. They register as legit companies, pay their taxes and dues so they can legally defraud (us).”

T.C. hopes that what I have written here “will awaken the minds of the ‘supposedly’ responsible government entities so that they will investigate the problems with insurance companies.”

We now have policy/plan holders of two insurance and two pre-need companies — National Life Insurance Co., PPLIC, Pryce Plans, and Prudentialife — complaining of “unfair treatment” and demanding justice.

As I promised, I’m providing here specifics regarding the NLIC, which has had six Insurance Commission conservators since 2008. These specifics are culled from the 27-point complaint submitted to the IC and the Department of Finance on Sept. 13, 2012 by 76 policyholders led by Kathy Yupangco. 

1. NLIC sold life insurance products, not authorized by the IC, from 2008 to 2010, when the firm’s certificate of authority was suspended.  In doing so, the company allegedly deceived both the insuring public and its own agents who sold the products.

One product sold, “Diamond 5,”entailed a life-insurance premium plus money deposits for which NLIC guaranteed a 10% fixed return, as long as policyholders didn’t withdraw their deposits for 5 years.  NLIC allegedly used the proceeds to pay its maturing obligations to stay financially afloat, much like a Ponzi scheme.  Once money stopped trickling in, the scheme collapsed. 

Thus, when the 5-year period lapsed in 2010, NLIC couldn’t return the policyholders’ money. The amount owed them reached P2.1 billion by end-2012.

2. In 2002 NLIC had a “margin-of-solvency” deficiency of P240 million, but the shareholders never infused additional capital as required by law. In November 2008, NLIC “managed” to secure a certificate of authority to operate again, based on an “undertaking” signed by Benjamin de Leon, chairman and president. He promised to infuse additional capital to address the MOS deficiency that had grown to P1.59 B. No capital infusion was made and by 2012 the deficiency had reached P2.1 B.

3. NLIC hasn’t even complied with the minimum paid-up capital requirement of P250 M. As of Dec. 31, 2011 its paid-up capital was only P100 M.

4. The MOS deficiencies notwithstanding, NLIC transferred assets (money and property) to its subsidiaries, whose directors were the same as NLIC’s.  Examples:  In 2003 when the deficiency was P981.7 M it invested P803.7 M in NLIC Ayala Property Holdings, Inc.  In 2004, with deficiency at P1.18 B, NLIC invested P180 M in Sikatuna Property Holdings Inc.

5. At the first public meeting between NLIC and its policyholders last April 11, de Leon evaded answering questions on what happened to the policyholders’ money and what he would do to return it to them.  Instead, he referred to the sixth IC-appointed conservator, Ermilando Napa, who presented a plan to convert the policyholders’ P2.1 B deposits into equity at 80% of value and to sell some assets to remove the MOS deficiency and NLIC’s liabilities to them.  

The policyholders deem the proposal “unjust and unacceptable” for nine reasons, which for lack of space can’t be specified here.  But the formula clearly shows one-upmanship on the part of NLIC.

 Considering these partially-cited complaints against NLIC, PPLIC, Prudentialife, and Pryce Plans, one finds certain parallels with the P10-B pork-barrel scam that is fueling widespread public outrage and protest, condemnation and demand to abolish the pork barrel, officially called the Priority Development Assistance Fund.

First, both the pork-barrel and the insurance-cum-preneed-plan scams deal with public money: squandered taxes paid by the people allocated to the PDAF, and policy/planholders’ premiums/deposits, or trust funds, dissipated by the companies and channeled to their subsidiaries.

 Second, the scams bare the selfishness and greed of the parties involved both in the pork-barrel revelations (certain legislators plus other players) and the insurance and pre-need firm anomalies, their insensitivity towards the helpless people they have exploited.

Third, the two scams expose how certain government administrative, supervisory and regulatory bodies are so weak, inept and prone to collusion with ill-motivated parties.

 All of these parallel factors call for thoroughgoing investigation to fully disclose the facts and everyone involved. All call for the filing of appropriate charges to prosecute and penalize those found to be accountable. 

  All call for definitive remedial measures.

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