A PROGRAM director for a financial advice community has called on regulators to be proactive against fly-by-night pre-need companies amid the improving fortunes of legitimate players.
Pre-need companies are corporations duly licensed by the Insurance Commission (IC) and registered to operate and engage in selling pre-need plans or contracts such as life plans, pension plans, educational plans, or other similar contracts and investments.
Fly-by-night companies refer to those that have only been in business for a short time and are only interested in making quick profits, usually by shady or irresponsible acts; or those without an established reputation; as well as those that seek to evade responsibilities, and especially creditors, by flight.
In an interview with SunStar Cebu, Zigfred Diaz, program director of Certambayan, a Sustainable Energy and Enterprise Development for Communities (Seed4Com) initiative, questioned the moves of regulators toward fly-by-night pre-need companies and the lack of enforcement of policies.
“Ngano man nga ang usa ka illegal, himuon man nimong legal?” asked Diaz.
(Why is an illegal operator instead made legal?)
Diaz said a private citizen had sent a letter to the IC asking for an update on a pre-need company that was given a cease and desist order (CDO) by the commission three years ago. Diaz was monitoring the company in question but was surprised by the response received from the IC, which included asking for an update to legitimize the company.
“But surprisingly sa ilang suwat, gibutang nila didto nga nangayo sila og update sa pag legitimize ani na business,” said Diaz.
(Surprisingly, in their letter, they asked for an update for legitimizing of this business.)
Timeline
In March 2020, the IC issued a CDO against MCIA Group Inc., as it is allegedly engaging in illegal pre-need business and acting as a pre-need company without a license.
The MCIA Group Inc. then filed a motion for reconsideration in August of the same year.
On Nov. 29, 2022, the IC denied the motion of MCIA Group Inc.
On May 29, 2023, the IC responded to a citizen’s complaint, confirming MCIA Group Inc.’s violations and its warning to the group, and revealing that it had sought an update from MCIA Group Inc. on its legal status.
“We likewise requested an update regarding its undertaking to legalize its business by registering before the Commission,” its letter dated May 29 read.
Claims were made about MCIA Group Inc. being a legitimate organization on social media on Sept. 29, 2023.
Diaz sent a letter to the Securities and Exchange Commission (SEC) regarding MCIA Group Inc. since it changed its name from MCIA Group Inc. to MCIA Group Plans Inc.
“The use of ‘PLANS’ in the corporate name can be misleading and is potentially designed to give the public a false impression of legitimacy in the pre-need sector,” Diaz said in the letter he sent.
On Oct. 3, 2023, Diaz sent a letter to the SEC challenging the stance of the SEC that the MCIA group was legitimate after changing its name to include “PLANS,” in which the commission reaffirmed its position.
SEC allegedly reaffirmed that there is no breach in compliance with MCIA.
Chapter 14 of the Pre-Need Code (Republic Act 9829) states that “The CDO shall specifically enjoin the pre-need company from performing certain activities and shall impose fines and state the required remedial actions.”
Issues and scam
Diaz said the scams committed by fly-by-night operators involve lowering the prices of monthly plans compared to legitimate pre-need companies and are often arbitrary while legitimate companies are often subjected to regulators and computations.
“So kaning mga legitimate na pre-need ning offer og P1,000; here comes an illegitimate pre-need na nag offer og P300 to P400,” said Diaz.
(So these legitimate pre-need firms offer P1,000. Then here comes an illegitimate pre-need firm that offers P300 to P400.)
Diaz added that committing a violation or receiving a CDO is not similar to applying for a business permit in which one can comply with the deficiencies another time and still be allowed to operate.
“Violation of the Pre-Need Code is criminal in nature,” said Diaz.
Diaz said the IC should be strong in resolving issues against violators and said they had received complaints from fly-by-night companies.
Diaz questioned the actions of the IC, saying it can send the wrong message to the public that illegal entities will be allowed to operate as long as they correct themselves.
Diaz said there should be another assessment made on the Pre-Need Code to address the problems of the pre-need industry, saying that until today, the pre-need industry still faces the same issues.
Doing better
The IC reported in October that the pre-need industry, excluding fly-by-night pre-need firms, saw an increase in net income to almost P2 billion from January to June due to the increase in life plans sold.
The latest data from the IC showed that the net income of the industry reached P1.89 billion from January to June, an increase of P437.2 million compared to the profit in the same period in 2022.