ROXAS: MORE PROTECTION FOR PRE-NEED PLANHOLDERS PRUDENTIAL MEASURES AT THE HEART OF NEW PRE-NEED CODE

Senator Mar Roxas said pre-need planholders will have more protection against unscrupulous business practices with the proposed Pre-Need Code that has been approved by the Senate on Second Reading last week.

"Inaasahan nating nadagdagan na talaga at napatibay ang proteksyon para sa mga magulang na bumibili ng mga education plans. Daang-libo ang pamilya na talagang nasaktan sa katiwalian na nangyari noon, at sa bagong Pre-Need Code, inaasahan nating hindi na ito mauulit (With this new law, we expect that protection for parents who buy education plans has been increased and strengthened. Hundreds of thousands of families were affected because of unscrupulous practices in the past, and with this new Pre-Need Code, we expect that this would not happen again)," he said.

Roxas, Chairman of the Committee on Trade and Commerce, said at the heart of the new Pre-Need Code is strengthening prudential measures applied to the pre-need industry. At present, regulation of pre-need plans is insufficient, contained in only one paragraph of the Securities Regulation Code.

The law specifies what portion of every premium payment by planholders should be deposited to the trust fund, so the welfare of planholders is prioritized over marketing and other expenses. Also, "we really listed those securities or investments where a trust fund can be invested in." In the past, there is no restraint over the investment of trust funds in companies that are also owned by those who own or manage the pre-need company.

Roxas also said the proposed law requires independent managers of trust funds. "Directors, officers and owners of pre-need companies should also not have any connection--direct or indirect--to those who manage the trust fund. Unlike before, those who owned, say, CAP, also had interests in the trust fund department of the bank that manages CAP's trust fund," he said.

"These are all examples of how we included prudential measures to ensure that the past pre-need industry debacles would not happen anymore. So if there's really an intention to collude and defraud planholders, they would now think twice before doing so," he said.

Roxas also cited the creation of a liquidity fund, wherein the expected payables of a pre-need company in a year--tuition fees, for instance--should already be in cash one year ahead. "This would ensure the payments promised to planholders," he said.

Also, a pre-need company would not be allowed to pay dividends to its stockholders if there is impairment in the trust fund. "This means that before stockholders pay themselves, they must take care of their obligations to planholders first."