DOF pushes pre-need code to protect planholders

The Department of Finance (DOF) is pushing for the swift passage of pending measures seeking to institute a pre-need code for the local industry which aims to protect investors and planholders.

In a position paper, the department said it is necessary to establish a code for the local pre-need industry to regulate its operations and avoid problems such as what happened to the case of College Assurance Plan and Pacific Plans in 2004 when the two companies failed to service the claims of planholders due to lack of funds.

Several measures seeking to strengthen and rationalize the pre-need industry are pending in Congress. House Bill 159, filed by Rep. Juan Edgardo Angara and House Bills 294 and 292, filed by Rep. Jaime Lopez, are pending with the committee on banks and financial intermediaries and with the committee on ways and means.

“The DOF fully supports the intention of the bills to establish a code necessary to supervise and regulate the operation of the pre-need industry. There is a strong need for legislative framework that will greatly help the government regulatory body in overseeing its operations,” the Finance department said in a position paper.

The DOF also does not have any objection to the transfer of the regulation of pre-need companies from the Securities and Exchange Commission (SEC) to the Insurance Commission (IC), a proposal which is also amenable to the corporate regulator.

Furthermore, the department also underscored the need to increase the amount of a pre-need firm’s monthly deposits to its trust fund from 44 percent to 60 percent of the gross pre-need price. It also supports the creation of the planholders’ protection fund, saying that this is crucial for the protection of the planholders.

“The DOF also supports the provision that the trust fund be administered and managed by the trust department of a reputable bank, trust company or investment house registered under Philippine laws,” the DOF said.

The authors of the bill for their part said that the popularity of pre-need products such as educational, memorial and pension plans in the country has given rise to an industry with over P90 billion in assets. They said the proliferation of these pre-need companies makes is crucial to ensure the protection of the planholders.

The proposed measures also contain several safeguards to protect the planholders, such as the creation of a trust fund to ensure the delivery of the guaranteed benefits and services provided under a pre-need plan contract.