Pre-need shakeup looms, says SEC
Likha C. Cuevas-Miel
Manila Times
FACED with a tough economic environment and lingering public ill will caused by the failure of some of its big players, the pre-need industry may suffer a further shakeup, with some companies likely to fold up, according to the Securities and Exchange Commission (SEC).
Based on the data obtained by The Manila Times from the SEC, 5 pre-need companies failed to renew licenses due to slow sales or their falling short of the minimum capitalization requirement.
At present the government requires a single-plan pre-need company to have at least P50 million in capitalization to support its business. The SEC also requires a minimum capitalization of P75 million for a two-plan company, and P100 million for a three-plan firm.
According to the SEC Non-Traditional Securities and Instruments Department (SEC-NTD), Classic Plans Inc., which sells pension plans, failed to comply with the requirements for renewing its license.
Eduplan (Philippines) Inc. and Millenium Plans Inc. opted not to renew their licenses and decided to pursue “voluntary liquidation,” The SEC-NTD said Eduplan cited slow sales while Millenium, which sells educational and pension plans, “was not interested in pre-need anymore.”
Also joining the list is Primeplan International Corp., which suffered from capital deficiency and other compliance issues, thus barring it from applying for a license to sell pension plans.
Primanila Plans Inc. also failed to get a license since it didn’t comply with the requirements. The SEC issued a cease and desist order, restraining the company from selling pension products to the public, Commissioner Jesus Enrique Martinez said.
The operating environment has become tougher in the aftermath of the industry crash several years ago. “If you notice there is like a purging process and I think the purging has probably taken effect, which has been hit now by circumstances in the general economic trend, which has fallen into only one—it’s just uncertain,” Martinez said.
Because of this uncertainty, people turn to other forms of investments like land and other instruments. In addition, other investments instruments like variable insurance products have begun encroaching into the pre-need’s traditional business, he said.
“There is more an effect [of] the variable life insurance contract with the pre-need because you already have it riding many times on the insurance contract. And when you talk about the face value [of a] pre-need plan, they might as well go to the variable insurance contract. It doesn’t tell you that they’re going to bury you but it can produce you the money for that purpose,” the SEC official said.
“The only products that are selling these days are the life plans because people realize that it is very expensive to die,” he said, citing services-oriented plans which include wakes, preparation, body pick-ups, cremation plan and the like.
In April, pre-need sales grew by a quarter from last year due to the surge in demand for life plans, with total plans sold across all pre-need products rising 25.2 percent to 17,806 from a year ago. Life plans led the growth with a 63.1-percent jump to 13,015 year on year. Education plans continued its decline of 27 percent to 677 while sales of pension plans also contracted by 22.7 percent to 4,114.
One Comment, Comment or Ping
Rodelio J Vidal
ngayon lng po ako nagtanong tungkol sa prima plans,inc..ano po ang mangyari sa mga pulis na nakaltasan na mula 2000…may habol pa po ba kami?…salamat po
Feb 4th, 2012
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