MANILA – A big labor group denounced Congress for the “unwarranted delay” in the approval of a proposed legislation designed to protect the interests of millions of Filipino preneed plan holders from unscrupulous insurance companies.
Former senator Ernesto Herrera, the secretary-general of the Trade Union Congress of the Philippines (TUCP), said the failure of Congress to approve the proposed Preneed Industry Code does not bode well for the plan holders who have been victimized by insurance firms which declared bankruptcy or failed to honor their commitments to their clients allegedly through misreporting of their finances.
Most of the victims are salaried employees and overseas Filipino workers (OFWs) who have lost all their savings invested in these preneed firms, said Herrera who spoke on behalf of TUCP, the country’s largest labor federation.
“Preneed plans represent the hopes and dreams of millions of Filipinos for the college education of their children, or for their financial security upon retirement,” he emphasized. “And legislators are duty-bound to safeguard these hopes and dreams.”
The proposed code is still pending before the House of Representatives and the Senate which adjourned for their month-long Christmas recess on December 17.
As a result, Herrera pointed out that until today, the plan holders have absolutely no protection once the provider that sold the plan collapses, as in the case of the Legacy Consolidated Plans Incorporated in December 2008.
Reports are that Legacy Plans belongs to a group that also owns several rural banks throughout the country, at least nine of which have been closed down by the Central Bank of the Philippines for alleged violation of the country’s banking laws.
The other preneed firms which collapsed as early as 2004, Herrera said, are the College Assurance Plans Incorporated and the Pacific Plans Incorporated.
Herrera prodded the lawmakers to move quickly to protect the plan holders from further unnecessary risks and, at the same time, revitalize the preneed industry amid the global financial and economic turmoil. He recalled that before the collapse, the Securities and Exchange Commission (SEC) warned that several of these companies had created a smokescreen of faulty financial reporting which prevented the early detection of their financial problems by Central Bank regulators.
The SEC reported that at least 29, or 35 percent of the country’s preneed firms registered between 1977 and 1999, had limited their operations or closed shop, leaving tens of thousands of their clients holding an empty bag.
According to Herrera, the proposed code aims to install a regulatory framework to ensure the industry’s long-term stability, protect plan holders and prevent abuses like self-dealing by a provider’s trustee or officer.
For instance, Herrera said the bill affords protection to plan holders through an insurance fund that would guarantee benefit payments if the pre-need firm collapses. The proposed code also mandates providers to deposit in a trust fund up to 60 percent of the money collected from plan holders, Herrera said.
At present, Herrera said providers are required to put in only 45 to 51 percent of collections to their trust fund, which refers to assets reserved for benefit payments to the plan holders.
The TUCP chief revealed that due to dwindling public confidence, the preneed industry is now in the doldrums.
As proof, Herrera revealed that in the first 10 months of 2008, education plan sales plummeted 51.8 percent to the equivalent of $30 million from the $60 million recorded for the same period in 2007.
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