Angara airs caution on pre-need firms
Sept. 1, 2002
Sen. Edgardo J. Angara has cautioned against stifling the P38billion preneed industry through too much government regulations as he opposed the creation of a special agency to regulate the pre-need firms.
Angara said that what the government ought to put in place are tight safeguards to make sure that people’s investments are not misused by owners of the pre-need companies.
“What is clearly needed are prudential regulations, no the stifling or choking presence of government,” he said.
After several public hearings on the regulation of the pre-need industry, Angara said that either the Insurance Commission (IC) or the Securities and Exchange Commission (SEC) can supervise the operations of the pre-need companies as long as the following are put in place:
– Pre-need companies should be prevented from investing or diverting the huge trust fund into other companies they own, or engage in other forms of illicit investments. There should be no conflict of interest in the investment decision.
– The full transparency in managing the funds, including regular reporting on the fund status.
– The need to make sure that all investments made from the trust fund are safe and sound investments.
“At the end of the day, what is important is that there are adequate safeguards to protect the savings of the ordinary people who want insurance or educational plans,” he said.
Just as the laws penalized insider loans in banks under the prohibition on directors, owners, stockholders, and related interests (DOSRI), Angara said that the owners of the pre-need companies should not invest the trust fund under their care in other companies they own or control.
“There is definitely conflict of interests in such situations,” he said.
He also said that the pre-need industry is already one major source of development funds and it is still growing.
The industry has been growing at 15-20 percent a year but recently its growth level has weakened due to reports of soured investments.
Too much regulations will further slow down the growth of the pre-need industry, huge potential of which as a mobilizer of domestic resources and development funds has yet to be fully tapped, Angara said.
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