A cancer survivor who is a mother of four children from southern Philippines came to see me lamenting about the money she lost with the collapse of Legacy Pre- need Corp. She is one of more than 30,000 poor parents and retirees who entrusted their life savings to Legacy to insure the college education of their children or to have secured retirement benefits.
Many of the Legacy’s plan holders also hoped and dreamed that after years of employment abroad like in Middle East, they will return home to enjoy comfortable lives with their families. With the collapse of Legacy, those hopes and dreams have dimmed.
The Securities and Exchange Commission (SEC), Congress and the judicial system have failed to protect the interest of the preneed plan holders.
Legacy is now the new addition to the two biggest pre-need companies, College Assurance Plan (CAP) and Pacific Plan, and to more than fifty preneed companies that failed to pay the tuition fees or retirement obligations in the last 7 years. Looking back, CAP with close to one million plan holders in 2004, had less than P10Billion total trust fund assets –too little to cover its liabilities to its plan holders estimated at about P25 Billion. This has been the prevalent financial conditions of many preneed companies… not having enough assets to cover huge liabilities.
Without immediate remedy, there will be more pre-need companies to collapse. Who could have protected these helpless pre-need victims?
The SEC could have prevented the “Ponzi-like” operation of pre need long time ago.
From early 1990, it was clear then that the preneed business model was defective. I was then the President of the Actuarial Society of the Philippines when we encouraged some actuaries to volunteer in developing proper guidelines for pre need to address its inherent weaknesses. For instance, the pre-need pricing was inadequate as a result of wrong formulae and assumptions. Moreover, their accounting is dubious as it hides the biggest liability of pre-need companies. Additionally, only about 50% of the money taken from plan holders by most preneed companies was put in the trust funds that were then placed in questionable investments. And to top it all, many preneed companies were mismanaged as their officers were irresponsible and unprofessional… all these combined spelled doom to deprive the preneed plan holders the promised benefits or the very least the amount they entrusted to the preneed companies.
Despite this mess, the SEC continues tolerating the industry’s wrong practices and standards. The volunteer actuaries’ recommendations to correct the situation were rebuffed as some SEC Commissioners were highly influenced by the Pre-need Federation that lobbied to make the rules never become adequate to protect the saving public.
Many could not understand why preneed stockholders and accounting and actuarial professionals involved in pre-need failures are neither sanctioned nor investigated. They also questioned the logic of rehabilitating these failed companies when their chance of success is nil. As these rehabilitations proceed in snail’s pace, many victims are giving up hope that they can get back their investments. Some even completely abandoned their claims.
In desperation, in 2005 some pre need victims went to court. Ironically, some of them ended up in jail when the preneed company filed libel case against them.
Who then cares about the plight of these victims?
What about Congress? The proposed Bill on pre-need has been languishing in Congress for a decade. The important parts of the bill were lost in the process of deliberation and ended like the same deficient rules. Very few lawmakers understand the need for good pre-need law. Most of the lawmakers are apathetic or may be blind supporters of the industry. Recently, the Senate discussed the Legacy case. Despite intense inquisition, the Senate barely scratched the surface of the issue.
In any democracy, all groups of people must have a voice in Congress. Our Constitution provides for the creation of the party-list system. That was what some of the victims exactly did. But for some technicalities, the Commission on Election denied its participation in the last election.
In the light of this, what should the people do now?
The people must unite and form a new party-list group! The victims’ voices must be heard in Congress. The victimization of the poor parents and retirees must end. In this spirit, I am calling all citizens to join me to continue this crusade to correct this injustice to our people.
Evangeline Crisostomo-Escobillo was a former Insurance Commissioner and SEC volunteer-actuary.