The Pre-Need Code of 2008: Protecting the Anxious
Posted by Ayel | Posted in Blogging, Current Events | Posted on 24-07-2008
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A FEW years ago, the horrors of closures of pre-need institutions like CAP traumatized many of us so bad that the affected planholders cursed those companies and decided right there and then to never trust them again.
That’s never gonna happen again once the Senate Bill 2077 or the Philippine Pre-Need Code of 2008 is enacted. With the Senate’s passing this bill, we have something to hope for.
At the end of this post, you may download the primer of the pre-need code.
In an email, Sen. Mar Roxas, who is the author of this bill, said that
“…the code will hold pre-need companies to stricter standards to safeguard the rights of Filipino families, such as concrete measures to protect plan holders; detailed provisions on the securities a pre-need company can invest in; and the percentage of the premiums that should go into the trust fund. It also prescribes qualifications for those who manage the trust fund; and establishes an agency to regulate pre-need companies based on prudential principles based on soundness, stability, and sustainable growth.”
I, myself, invested in a pre-need plan as no one knows for sure what will happen in the future. For a minimal monthly deduction from my salary, my insurance package would cover my important needs in the future–hospitalization, for example, in cases of illness or accidents, which I hope I wouldn’t suffer from. I would also be receiving pension after the maturity of the plan.
It is good that Sen. Mar Roxas came up with this bill that safeguards the interest of Filipino families who want to prepare a better future for themselves and for their children.
Sen. Roxas is urging the support of everyone as the Lower House is still reviewing the bill. Let’s hope it will be approved.
Download the Pre-Need Code Primer
Kudos to the initiatives of Mar Roxas! I hope that his bill would pass so that those who want to secure their future can be assured of the pre-need company that they are in to.
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my friend was a victim of the CAP problem. she ended up not using her CAP entirely. oh well, let’s just hope this bill gets approved so that needs will be given especially when you paid for it.
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Kevin, sipag ng bet mo, ah…hehe. This bill will further propel the popularity of Mr. palengke.
prinsesa, halos lahat cguro tayo may friends na nabiktima ng CAP. Kaya, tayong lahat, lalo na mga bloggers, magtulungan sa paggawa ng ingay tungkol sa code na ‘to…
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There has been a lot of publicity in the Press about these Rural Banks of Legacy Group, going on Public Holiday and being put under ‘Receivership’ by the BSP.
There is a lot less publicity regarding Legacy Consolidated Plans Inc., an SEC Licensed Pre-Needs Dealer.
Many invested into a 3 Year Pension Plan (Classique A) via lump sum payment up front. The ‘Maturity Value’ was Double the Pension Plan ‘Contract Value’.
So provided this was run properly and 51% paid of the PPC value for all Pension Plans sold, was paid into such Trust Fund, it should have given some safeguards, to a percentage of the funds ‘invested’.
The ‘twist’ to this particular investment, being a “Buy Back” Agreement, signed by the Owner of the Pension Plan as the 1st Party, and Legacy Card Inc. as the 2nd Party.
I guess all the investors were too ‘greedy’ to ask detailed questions as to “why does Legacy Card, want to buy this Pension Plan, and how can they afford to pay the ‘Installments’. Basically the “Deed of Assignment”, promised 10% of the Maturity Value up front. That’s like 20% Advanced Interest, meaning you only pay 80% of the PPC Contact Value as Nett payment. The 90 % Balance being paid via 12 x Quarterly Post Dated Checks (PDC’s).
So your Return is 2.25 x Nett Investment. Php80K Nett (min), gave 12 x Php15K over 36 Months = Php180K.
That’s a ROI = 1.25, which over the 3 Year Term = 41.67%pa APR.
I guess that is why some investors put in Php2M, Php6M or even Php11M – because they were greedy.
Not as greedy as the Legacy Group however, since despite not having presented the required Financial Statements to the SEC, still got given License to continue selling these Pre-Need Pension Plans in 2008.
In August 2007, they announced that the PNBB Plan would be withdrawn, and it was, on 3rd September. But is was re-introduced in October 2007, just a month later.
In August 2008, they again announced this PNBB product was to be withdrawn.
There was a ‘clamour’ of new placements from ‘greedy’ investors wanting 41.67%pa APR return on their funds. Knowing such investment, did not have PDIC cover, only the Rules and Regulations of the ‘SEC’, governing Pre-Need Corporations and the Plans being offered.
There was also ‘BP 22′ anti-bouncing check law, to give some protection to those ‘installments’ in return for selling such Pre-Need Pension Plans to Legacy Card Inc.
So Legacy Consolidated Plans Inc. and some 10 other Companies within they Group have filed for dissolution with the SEC apparently. They claim they are insolvent? So what happened to the ‘Php15.3 Billion’ in Assets, as of 2006. Presumably should have been even higher in 2008?
We are forming Groups to join together and ask the NBI to investigate if a criminal act was committed by the Legacy Group. The Lawyers appointed by Legacy, have said much of the Assets have gone. The Trust Fund does not have the funds it is supposed to. They expect the Plan holders to sit back and accept what ever they get from the liquidator.
The ‘SEC’lacked the ‘muscle’ and ‘teeth’(and willpower it seems) to refuse License renewals until the finances presented, audited and investigated. How can the Trust Fund not have the 51% minimum of PPC Value payments mandated by the SEC? Yet the SEC, kept renewing their License!
Legacy Investors (Visayas) Group
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@Bitster – Hi! I’m posting your comment as a new blog post.
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@ayel -
This ‘SBN 2077′ the Pre-Need Code of 2008, was passed back in June of 2008
It took until December 2008, before it was ‘Established’ however, so wont become ‘Law’ and effective to 2009.
03-December-2008, Wednesday.
Committee/SubCommittee Time and Venue Agenda/Resource Person
BANKS & FINANCIAL 09:30 AM HBs 159 & 295
INTERMEDIARIES RVM Bldg. Conf. Rm. Establishing the Pre-Need Plan Code
of the Philippines
(Reps. Juan Edgardo Angara & Jaime Lopez)
HB 294 Establishing the Pre-Need Insurance Corporation, defining its powers & duties (Rep. Jaime Lopez)
SB 2077 Establishing the Pre-Need Code of 2008
Legacy Consolidated Plans Inc. was using ‘loopholes’ and abusing it’s SEC License, to sell Pre-Need Pension Plans, even up to September 25th.
Then it turns around (before this new Pre-Needs Code of 2008 can insist on 51% min. of PP ‘Contract Values’ being in a ‘Trust Fund’) and submits a Petition to the SEC for dissolution.
The ‘Legacy Group’ have stolen Millions, perhpas Billions of Peso from these Pre-Need Pension Planholders.
The ‘Pre-Needs Code of 2008′ is too late (perhaps deliberately so?) to protect these Pre-Need planholders.
The SEC kept renewing the LCPI License, seemingly with no investigation into the LCPI finaces?
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Actually what you Quoted by me, was posted as a ‘Comment’ on the ‘PEP COALITION’ Blog http://pepcoalition.wordpress.com/news-archives/#comment-36
http://pepcoalition.wordpress.com/what-bloggers-say/#comment-35
I decided to post such ‘Comment’ after reading this:-
http://www.manilatimes.net/national/2008/dec/19/yehey/top_stories/20081219top2.html
“Planholders’ unity
Imelda Huala, a Legacy Consolidated planholder from Pilar, Bataan, told The Times over the phone that she would welcome the liquidation of her first child’s Optimax Plus education plan. Her child is already 10 years old.
“Even if they could only give us back the premiums that my husband paid, that would be enough as long as we can get something out of it. I don’t have anything left. My husband died of colon cancer and the livelihood that he left me with was taken away from me. I don’t know where we can get the money for my eldest child’s college education. All I can do is fight for it,” she said, crying.
Gomez of PEP Coalition said that the Legacy planholders should get together and form a group to gather all the pertinent documents, cases and other information needed to lodge a case against the management of the preneed firm.
“When they get the people—50 would be enough—we will help them, coordinate with them. It is hard when they come to us individually because how can we help them when we do not know Legacy?” she added.
Gomez said the planholders should be proactive to fight for what is due them”.
Well I have formed such a Group. This is a ‘Private Wiki’ since some things we discuss should not be made Public, so The Legacy Group knows what we intend to do, to fight against them.
Those Investors into the ‘Legacy consolidated Plans Inc.’ “Pre-Needs” Buy Back Plan (PNBB2), that put funds into such ‘3 Year Pre-Needs Pension’, can Join this Group.
It is http://www.Legacy-Claims-Cebu.wetpaint.com
However to Join, one has to be sent an invite! to get one of those, a ‘Moderator’ on the Group needs the e-mail address (and preferably some proof/evidence that they did place such Pre-Needs Plan with LCPI, like quoting their PPC Plan No.?).
I believe there are other ‘Legacy Investors Forums’ in other parts of the Country.
Some Investors are Foreigners with Filipina wifes/fiance, and not currently in the Philippines. They are probably feeling rather anxious and cut off, and looking for information, and guidance on what they can do, without actually being there in the Philippines currently.
All those who invested after April 2007, will not have got their original investment back. Those who placed funds after July 12th 2008, have lost ALL their Investment, because Post Dated Checks from 12th October 2008 onwards started ‘Bouncing’.
Legacy promised the Investors replacement Checks would be issued. They also offered compensation of 3%pm for any delay in issuing.
All these Investors have is ‘Batas Pambansa Blg. 22′ (Bouncing Checks Law), to give them some level of protection.
We hope that the ‘PEP Coaltion’ can offer help and guidance from their experience of dealing with big Pre-Need Corporations that seem to declare insolvency and short change the plan holders.
They do it because they can seemingly get away with it, because this ‘Pre-Need code of 2008′ does not seem to have been fully implemented yet?
If these Pre-Needs Companies are required to submit Financial Reports to the SEC, and they are supposed to meet certain obligations for the ‘protection’ of the Planholders investments via the Trust Fund, how can LCPI say they say there is not much left in the Trust Fund?
Were they not supposed to add 51% of all Pension Plans sold, into the Trust Fund, including those sold from April to end of September, where the Investors received absolutely NOTHING (let alone the ‘promise’ of “Double your Money in 3 Years”)?
Or are they just allowed to steal that money, then declare themselves bust! This is criminal Fraud.
If Legacy had kept that promise to pay the Investors back their Nett investment (less half the value of any PDC’s cashed) my guess is the investors would not have liked it, but most just happy to not have LOST anything.
Verbal promises won’t cut it, as they already promised replacement checks for those that bounced, and that never happened.
‘Bitster’
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Sorry to rain on this legislative parade, but somehow it seems that new laws are not enough, at least not the kind that seeks to address the symptoms rather than the root causes of the pre-need industry’s problems.
A more thorough approach, involving expertise of the Insurance Commission, is perhaps better. After all, pre-need is effectively an insurance contract, which has its own moral hazard problems and temptations for both insurer and insured.
Some thinking on this is at:http://foolawecon.wordpress.com/category/ponzi/
As can be seen from some of the comments here, the problem is with the “greedy” clients, who think there is such a thing as a free lunch, who can then be exploited by ponzi operators.
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