QuestionsQuestions (Republic Act No. 9829)
The policy is to regulate the establishment and operation of pre-need companies on a sound, efficient and stable basis to mobilize savings and prevent/mitigate practices prejudicial to public interest and protection of planholders. Regulation is through an empowered agency—the Insurance Commission.
Pre-need plans are contracts/plans for future services or benefits (including life, pension, education, interment, etc.) delivered at actual need or maturity in exchange for cash/installments with or without interest or insurance coverage. A pre-need company is a corporation registered with and authorized/licensed by the Insurance Commission to sell/offer pre-need plans, including certain entities selling such plans in their pre-need activities. A planholder is a person who purchases pre-need plans from the company for whom/whose beneficiaries the benefits are to be delivered, including assignee/transferee/successor-in-interest.
Any doubt must be interpreted in favor of the rights and interests of the planholder.
It has primary and exclusive supervision and regulation of pre-need companies, including approving licenses/registrations, fixing fees/charges, regulating and monitoring operations to ensure compliance, issuing cease and desist orders, subpoena powers, examining records, imposing sanctions, taking over companies through conservator/receiver/liquidator, and preparing/issuing rules and guidance.
The SEC shall not accept or approve articles of incorporation and bylaws of any pre-need company except upon favorable recommendation of the Insurance Commission.
Such amendments shall not be approved by the SEC without the favorable recommendation from the Insurance Commission.
After effectivity: at least P100,000,000 minimum unimpaired paid-up capital. Existing companies: P100,000,000 if selling at least three (3) types of plan; P75,000,000 if selling two (2) types; P50,000,000 if selling a single type. Existing companies with traditional education plans must have at least P100,000,000.
No company may operate without a license from the Insurance Commission. The license expires one (1) year from registration; it may be renewed upon compliance with prescribed requirements. Renewal is deemed approved if the Commission does not act within 30 days from filing.
The Commission prescribes and reviews qualifications/disqualifications, disqualifies unfit persons, and may disqualify/suspend/remove directors or officers who commit/omit acts rendering them unfit, considering integrity, experience, education, training, and competence.
Examples: (1) persons convicted of a crime involving any pre-need plan, security or financial product; (2) persons convicted of offenses involving moral turpitude or involving fraud/embezzlement/theft/estafa/fraudulent acts; (3) persons enjoined by court/quasi-judicial/administrative order from acting in a fiduciary position; (4) persons willfully violating or aiding violations of RA 9829/Insurance Code/Securities Regulation Code; (5) judicially declared insolvent/incapacitated; (6) persons found guilty by foreign court/regulator for similar acts.
At least two (2) independent directors or 20% of board members, whichever is higher.
They may not have an investment exceeding P5,000,000 in any corporation/business undertaking in which the pre-need company’s trust fund has an investment/financial interest, and relatives within the fourth degree of consanguinity or affinity are likewise limited to P5,000,000 during incumbency.
Within 45 days after the grant of license, and for every pre-need plan it intends to offer for sale, the company must file a registration statement. Rules require documents including a viability study with certification, under oath, of a pre-need brochure and other required information to protect planholders and the public.
Examples: duly accomplished Registration Statements; board resolution authorizing registration; opinion of independent counsel on legality; audited financial statements; viability study with certification under oath of a Commission-accredited pre-need actuary; copy of the proposed plan; and sample of sales materials (containing appropriate risk factors as determined by the Commission).
All forms/amendments for pre-need plans must be approved by the Commission; no contracts/certificates may be issued or delivered unless in the previously approved form. Advertising/sales communications must be non-misleading and must be approved by the Commission; Commission has 10 working days to approve/deny, and failure to act within the period causes approval. Selling/advertising in violation allows the purchaser to sue to recover consideration with interest, and the Commission may pursue administrative/criminal proceedings.
The planholder must be provided an information brochure filed with the Commission, explaining principal features, the default/reinstatement period and conditions, rates of return for scheduled benefit plans and illustrative yields for contingent benefit plans, and other information required by rule.