After suffering from a crisis of confidence for four years, the local pre-need industry is now seeing light at the end of the tunnel with the passage of the Pre-need Code of the Philippines into law.

Federation of Pre-need Plan Companies Inc. president Caesar T. Michelena believes that the pre-need business which suffered a string of controversies since 2005, is on the road to recovery.

Last December 4, President Gloria Macapagal Arroyo signed into law Republic Act No. 9829, also known as the Pre-need Code of the Philippines, which lays down the guidelines for the operations of pre-need companies and the sanctions that will be imposed for any violations that may be committed.

The Pre-need Code seeks to protect planholders and ensure the viability of an industry that has been weakened by a spate of bankruptcies and failures fueled by the worldwide economic slowdown. Sales of the industry have been on a downward trend for the past four years due to loss of investor confidence.

A key provision in the law is the transfer of regulatory jurisdiction over pre-need firms from the Securities and Exchange Commission to the Insurance Commission (IC).

“The passing of the pre-need law is a start of ‘brighter days’ for the pre-need industry and it will put to rest all fears of instability of the pre-need industry,” Michelena said.

He added that the Pre-need Law provides stability to the pre-need industry because it legitimizes and puts into place the necessary measures needed by the industry.

Michelena said the Federation welcomes the transfer of regulatory jurisdiction to the IC, pointing out that the latter is more technically qualified to oversee the operations of the multi-billion peso industry.

Among the other notable provision of the law is the adoption of the fit and proper rule which gives IC the power to prescribe the qualifications and disqualification of directors of pre-need companies. To avoid conflicts of interest, the Code prohibits directors and their relatives within the fourth degree of consanguinity in their personal capacity to have direct or indirect investments in excess of P5 million in any corporation or undertaking in which the pre-need firm’s trust has an investment.

To safeguard the interest of planholders, no part of the assets in the pre-need firm’s trust fund can be used for any purpose other than for the exclusive benefit of investors.