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By Likha C. Cuevas-Miel Reporter
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.
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