Nalzaro: The state of pre-need industry
Sun Star Cebu
Jan. 31, 2005
by Bobby Nalzaro
IN EVERY investment there is always a risk. It’s always a gamble. Even in banks, we cannot be sure of our deposits. There have been several cases of bank runs and bank bankruptcies. And what is lamentable on the part of the affected depositors is that they can only get a maximum payment from the Philippines Deposit Insurance Corp.
What is happening to some of the pre-need companies, especially for educational plans like that of the College Assurance Plan (CAP), is very alarming to beneficiaries and to those who plan to enroll in them. It is not only CAP, which is encountering financial trouble, but also Platinum Plans.
Reports have it that CAP can no longer shoulder the educational expenses of its thousands of beneficiaries. Colleges and universities that are CAP-accredited have complained that the company’s checks bounced and the company could no longer cope with the demands of their student beneficiaries.
Some of the supposed beneficiaries have already asked for a refund of their contributions and the company is facing a Senate investigation. I don’t exactly know the reasons behind the financial woes of the company. But sources said CAP’s investments, especially in the real estate, have not been doing well. They were hit by the financial crisis.
Like the Social Security System or the Government Service Insurance System, the pre-need companies are also into investing to bankroll the contributions of their beneficiaries. It is just like depositing money in the bank for future needs. Educational policyholders foresee the tuition increases so they apply for the plan.
But in the case of CAP, its contributions have gone up in the air because of the financial difficulties of the company.
A friend of mine invested in the company’s masters educational plan. Her contribution has amounted to P280,000 and upon maturity, which is five years, she can fully recover the amount invested plus interest rates. Now she is starting to claim the invested amount but the company cannot give it to her.
Sensing the company is financially in trouble, the regional manager resigned last December and the personnel cannot even explain why their central office cannot give the collectible amount to policyholders.
I think the government, therough the Securities and Exchange Commission, should act on policyholders’ complaints. If this thing cannot be properly addressed, this might lead to the collapse of the pre-need industry.
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