Former Securities and Exchange Commission (SEC) chairman, Perfecto Yasay Jr. said flaws in regulations caused problems in the pre-need industry.

Yasay told reporters in Ermita, Manila on Tuesday that when he was SEC chairman from 1995 to 2000, the pre-need industry did well and provided Filipinos access to higher education.

He said the problems started when regulators in the pre-need industry sought to parallel it with the accounting and actuarial mechanisms of the insurance industry.

"They want to change the pre-need industry into a totally different animal," Yasay said.

It was during Yasay's seven-year stint in SEC (associate commissioner from 1993 to 1995 and chairman from 1995 to 2000) that the pre-need industry grew rapidly as Filipinos conscious of educational attainments snapped plans sold by over 90 pre-need firms.

It was also during this period when the seeds of current problems of the industry--the open-ended, or traditional, educational plans--were planted. These traditional educational plans were priced based on assumptions that martial law-enforced cap on tuition fees would remain. In 1990, however, this cap was lifted, and the tuition fees grew at up to triple digit rates every year.

The likes of now troubled firms, College Assurance Plan (CAP), Pacific Plans, Inc., and the recently closed Legacy Group of pre-need companies all blame the skyrocketing tuition fee growth rates for their financial woes.

In the late 1990's Yasay signed the Pre-need Uniform Chart of Accounts, which required the pre-need firms to report their finances based on standard formats. This format eventually revealed that the financial status of the pre-need firms are in shambles as the trust funds, or the amount set aside to cover future obligations to, especially the ballooning tuition costs of, planholders, were not enough.

It was only in 2002, when former SEC chairman Lilia Bautista took over from Yasay, that the sale of traditional educational plans was stopped. Bautista's decisions were influenced by a report prepared by US aided Agile that showed a problematic pre-need industry.

Bautista also implemented tighter watch over the pre-need firms. The SEC then required the pre-need firms to increase their capital and plug the deficits in their trust funds. The deficits--which ran into billions of pesos for major pre-need firms like CAP and Pacific Plans--were based on an insurance-like actuarial computation of how much the firms should set aside in their trust funds.

The firms that were not able to comply with these were not allowed to sell new plans. This started the uphill quest of some pre-need firms, including CAP, since they were depending on new sales to service their current obligations.

"You can't change the rules just because AIG said so." said Yasay, referring to the the Agile study that could be traced to the US, as is AIG, the parent firm of Philam Life, a major player in the pre-need industry.

Yasay also lauded current SEC chairperson Fe Barin for doing a good job. Barin took over Bautista's post at the SEC in 2004.

"I hope she (Barin) doesn't give in to pressure of politicians who are being lobbied by people with different interest in the pre-need industry."

Yasay advised that regulators should not stop the pre-need companies from their operations (selling plans to the public) because that is the lifeline of pre-need industry that can ensure payment to planholders once their plocy matures. - With ABS-CBN News