Manila Bulletin
Mar 13, 2006
Pre-need problems restricted to open-ended education plans
The problem of the country’s pre-need industry is restricted to open-ended education plans and sale of such plan was already put to a stop in 2002 by the Securities and Exchange Commission.
This was emphasized by the Federation of Philippine Pre-Need Companies, Inc. in answer to reports that the 40-year-old pre-need industry is already in peril.
Even as several preneed companies are experiencing problems in servicing planholders who have availed of open-ended education plans, many others continue to meet their planholder obligations.
The Federation noted the pre-need industry offers three types of pre-need plans namely education, pension and life plans. It noted trust funds for fixed value education plans as well as pension and life plans remain healthy and sufficient to service availing and soon to avail planholders.
"People do not distinguish our different products. So while the problems of our industry primarily come from open-ended education plans, people mistakenly think it covers the whole industry. In actuality we have pensions, memorial and fixed value education plans – and they don’t have a problem but are unfortunately automatically included and perceived as problematic," said Federation president Juan Miguel Madrigal Vasquez.
Vasquez noted openended education plans comprise 20 percent of the industry’s whole market as of 2003 and has significantly decreased since then. He added there has been a contagion and the problems of the 20 percent pie have been associated to the healthier 80 percent fixed value education plans.
Meantime in order to help its member companies who are having or might have liquidity problems because of the sale of openended education plans, the Federation has proposed a "pain sharing formula" for approval of affected planholders.
"We advise those companies who have sold openended plans and believe that it is too difficult to meet their commitment because of the faster growth of tuition as compared to their investment, to dialogue directly with their planholders and work with them to put a ceiling so their commitments can be determinable. We also advise them to put in a ‘pain sharing formula,’ which will reward the planholder later in for agreeing to the ceiling," Vasquez said.
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