Government to ‘seriously consider’ preneed bailout
Jan. 27, 2009
Written by Mia M. Gonzalez & Cai U. Ordinario / Reporters
THE country’s economic managers will “seriously consider” appeals for a bailout of distressed preneed industry, Malacañang said on Monday.
Deputy Presidential Spokesman Lorelei Fajardo said in a news briefing that the appeal is expected to merit “serious consideration” from the national government since it involves the retirement funds of “hardworking government and private individuals.”
Meanwhile, National Economic and Development Authority (Neda) Director General Ralph Recto said the Insurance Commission (IC) should be tasked to regulate the industry, as well as other similar entities.
Recto said transferring the regulation of preneed firms to the IC is a practical solution, since he finds that the Securities and Exchange Commission (SEC) has “failed miserably” to properly regulate preneed firms. The SEC has been the regulator of the pre-need industry because preneed plans are considered securities.
At the Senate, Sen. Edgardo Angara moved to speed up passage of a new preneed code to protect the interests of planholders and investors, adding that the establishment of a comprehensive code would provide the preneed industry a much-needed boost.
“The preneed sector is a vital part of the national economy, and it has yet to realize its full growth potentials,” Angara asserted.
He explained that the regulatory framework embodied in the new code will provide the environment that will allow preneed firms to be stronger, bigger and more stable in order to “protect the public who invest in these preneed companies.”
Asked to comment on calls for a bailout package for the preneed sector, which has been hit by the global economic crisis, Fajardo said, “Hardworking government and private individuals have invested their retirement [funds] here….So we are seriously considering how we could give assistance to these preneed companies.”
She said concerned Cabinet officials may be asked to give their thoughts on the matter at Tuesday’s Cabinet meeting.
“The one in charge here is the SEC. So we would await the recommendation of the proper agency. They were the ones who have the investigation report on the preneed companies and their investigation would [be] a basis for our economic managers on how they could give assistance,” Fajardo added.
She said the President has not given any position on the matter.
Lawmakers have earlier proposed a bailout for the preneed industry, even if players in the industry have not asked for it and only sought reforms in SEC regulations that would give them more time to build up their capital.
Recto said preneed plans are considered securities because they are transferable and negotiable, unlike insurance policies that are fixed. These plans, unlike insurance policies, also have certainty of payment. There have already been calls for Recto’s recommendation at the height of preneed industry problems in 2005, but it did not prosper.
“The SEC shouldn’t regulate the preneed industry. The SEC failed miserably [in regulating preneed firms],” Recto said on Monday.
If the preneed industry is transferred to the IC, a cap on capital requirements of preneed firms should be imposed. Further, Recto said since existing pre-need firms are now saying that it was because of the deregulation of the education sector that they went under, firms should be mandated to return whatever amount of tuition should be if the tuition increase cap of 10 percent was kept.
Prior to the deregulation of the education sector, tuition in schools were only allowed to increase by 10 percent. However, with the deregulation, school tuition skyrocketed.
“It makes sense that the IC be the regulator [of the preneed industry], not the SEC,” he added.
Apart from preneed firms, Recto said the IC should also regulate even the government financial institution, the Government Service and Insurance System (GSIS) and the government agency in charge of overseas Filipino workers’ (OFW) insurance, the overseas workers Welfare Administration (OWWA).
Recto related his personal experience with the GSIS. He said that after working for the government as a legislator for 15 to 16 years and placing a contribution of around P3,000 a month, he only got a total of P180,000 in retirement benefits.
He said that, initially, the total of his benefits were pegged at P200,000 but due to the late-payment posting made by the Senate, the GSIS fined Recto P20,000. This, Recto said, was despite the fact that his salary deductions for GSIS contributions were made on time.
“If it can happen to me, what more to the ordinary Filipino?” Recto remarked. He added that the GSIS should do something to help its members who lost their jobs due to rationalization in the government. Recto said there are around 2,000 National Food Authority employees (NFA) who lost their jobs due to rationalization.
As for the OWWA, Recto said returning OFWs should also be assisted by the OWWA by giving them pay for a maximum of six months to tide them over, since they will not be able to immediately get jobs. At the end of six months, OFWs should be able to get jobs and resume their contributions to the OWWA.
The problems of the preneed industry started after the deregulation of the education industry but came into public view in late 2004, when College Assurance Plans Inc. (CAP) Universities and Colleges were no longer receiving payment from CAP for the education of its scholars.
After CAP, the SEC no longer allowed preneed firms to sell open-ended plans and encouraged only the sale of fixed plans. However, soon after, Pacific Plans Inc. filed for rehabilitation in 2005 which was granted by the Regional Trial Court in Makati in the same year. (With Butch Fernandez)
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