PRE-NEED The information brochure shall contain: (1) an

explanation of the principal features of the

A. De nition 
 pre-need plans; (2) a statement that the
planholder may avail of a default or
1. Pre-need plans
 reinstatement period within which to
reinstate his lapsed plan; (3) the conditions


of the same and the rates of return for
Pre-need plans are contracts, agreements,
scheduled bene t plans; and (4) such other
deeds, or plans for the bene t of plan
information that the Insurance Commission
holders which provide for the performance of
shall require. 

future services, payment of monetary
considerations, or delivery of other bene ts
Denial of registration of pre-need plans: 

at the time of actual need or agreed maturity


date in exchange for cash or installment
If on the basis of its latest audited nancial
amounts or insurance coverage.
 statements, trust fund annual statements,
and reserves valuation report, it has solvency
2. Pre-need company
 or trust fund de ciencies, or paid up capital

 impairment. 

Pre-need company refer to any corporation 

registered with the insurance commission Rules on pre-need advertising: 

and authorized and licensed to sell or o er to 

sell pre-need plans.
 (1) Pre-need plans shall be advertised and

 sold in an appropriate non-misleading
Q. Is a pre-need plan a security under the manner. 

SRC?


A. Yes. A pre-need plan satis es all the (2) Advertisement materials shall be
elements of an investment contract under approved by the Insurance Commission prior
the Howey Test. A planholder pays a pre- to its advertisement. Otherwise, the
need company a certain amount to answer advertisement is unlawful.

for a determined future need (education, - The Insurance Commission shall have a
pension, memorial), which is essentially a period of 10 days to approve or deny the
return, primarily from the e orts of others, advertising materials. Failure to act within
the amount of which is higher than the such period shall cause the materials to be
amount earlier paid. 
 deemed approved. 


 

B. Registration of pre-need plans
 (3) Any person who o ers or sells a pre-need

 plan in violation of the foregoing rules shall
Requirements before pre-need plans may be b e l i a b l e t o t h e p u rc h a s e r f o r t h e
o ered and sold to the public: 
 consideration paid with interest thereon. The

 Insurance Commission shall have the power
Registration with the Insurance to pursue the erring party in an
Commission.
 administrative or criminal proceeding.


 

All forms relating to pre-need plans shall be (4) Fine of P 100, 000. Provided, that a
approved by the Insurance Commission. 
 second violation shall, in addition to ne,

 results in the suspension of the license of the
No registered pre-need plan shall be sold pre-need company. 

unless an information brochure led with 

the Insurance Commission has been 

provided to the prospective purchaser. 
 


 


 


 

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 Mandatory cancellation of registration:
 After ling, petition shall be published in 2

 newspapers of general circulation once a
Issuance of an order of cancellation, if it week for 2 weeks reciting the contents
appears that the issuer: 
 thereof. 


 

(1) Is insolvent;
 C. Licensing of sales counselors and
(2) Violated the Pre-Need Code, and the general agent

rules thereof, or any order of the 

Commission; 
 Sales counselors refers to natural persons
(3) Engaged in or is about to engage in engaged in the sale of, or o er to sell, or
fraudulent transactions; 
 counsel of prospective planholders, for the
(4) Is in any other way dishonest or has made purpose of selling, whether or not on
fraudulent representation in any literature commission basis, pre-need plans upon
that has been distributed concerning the authority of the pre-need company.

issuer; 
 

(5) Does not conduct its business in No sales counselor shall be allowed to act as
accordance with law.
 such without being licensed by the Insurance

 Commission. Such license automatically
The Insurance Commission shall have the expired every June 30 or such date xed by
power to: (1) compel production of books the commission, and may be renewed
and records of the issuer; (2) examination of accordingly. 

persons connected therewith; (3) require a 

balance sheet exhibiting the assets and The following are the quali cations: 

liabilities of the issuer certi ed by an 

independent public accountant. If the issuer (1) Good moral character:

refuses, the refusal shall be a ground for (2) Not convicted of a crime involving moral
cancellation of registration. 
 turpitude; 


 (3) Applicant must undergo a training
Voluntary cancellation of registration and program approved by the Commission and
permit to sell pre-need plans:
 such fact certi ed under oath by a
Upon petition for cancellation or suspension representative of the pre-need company; 

by the Insurance Commission:
 (4) Applicant must pass a written

 examination administered by the
(1) Stating the reasons therefor;
 Commission. Provided, that the examination
(2) Proof of reasons; 
 may be delegated to an independent
(3) Proof of publication of a notice to organization supervised by the Commission.

stockholders, investors, planholders of the 


petition; 
 Ground for denial, suspension, and
(4) Board resolution certi ed under oath by revocation of license: 

the corporate secretary of the issuer and 

attested by the president or one performing (1) Material misrepresentation in the
similar functions approving such petition; 
 application;

(5) List of all planholder;
 (2) Obtained or attempted to obtain a license
(6) Certi cation under oath by the treasurer by fraud; 

of the issuer attested by the President that (3) Materially misrepresented the terms and
the planholders’ claims have been settled in conditions of the pre-need plan;

accordance with the pre-need plans; 
 (4) Sold or attempted to sell a pre-need plan
(7) A joint and several assumption of liability by means of false representation;

by the treasurer and president of the issuer (5) Terminated for cause from another pre-
for claims arising from the cancellation; 
 need company;

(8) Evidence of su ciency of trust fund to (6) Similar grounds found in Sec. 11: (i)
cover payments of outstanding liabilities to Conviction of a crime involving pre-need
planholders.
 plans; (ii) Conviction of a crime involving
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 moral turpitude, fraud, embezzlement, shall be made by the issuer during such
estafa, or other fraudulent transactions; (iii) period.

By reason of misconduct, is enjoined by a

court order from acting as a director, o cer, Within 30 days from the expiration of the
employee, agent, or occupying any duciary grace period and 30 days prior to the
position; (iv) Any person found guilty of expiration of the reinstatement period, the
willfully violation the Pre-Need Code, pre-need company shall issue a notice that
Insurance Code, and SRC; (v) Persons the plan will be cancelled if not reinstated
declared insolvent; (vi) Any person found within the reinstatement period. Failure to
guilty by a foreign court, regulatory authority, give notice precludes the issuer from treating
or government agency of any similar acts the plan as cancelled. 

from the foregoing.
 

(7) Willfully allowing the use of one’s license A planholder may terminate his plan by
by a non-licensee or a barred individual; 
 issuing a notice to that e ect to the issuer.
(8) Analogous circumstances
 The planholder shall be entitled to a

 termination value which must be fair,
Q. Can a general agent sell pre-need plans? 
 equitable, and according to the Issuance
A. Yes. Provided, the general agent is Commission issuances. 

licensed with the Commission and is a 

registered corporation of partnership in the A pre-need company may o er to terminate
Philippines. The following are the the pre-need plan for consideration
requirements for licensing of general agents:
 exceeding the termination value provided: (i)
(i) Copy of certi cate of registration; 
 there is prior approval by the Insurance
(ii) Copy of articles of corporation, Commission; (ii) Consideration shall be
partnership, cooperation and by-laws; 
 below the pre-need reserves for the speci c
(iii) Minimum paid up capital of P1M 
 plan; (iii) the o er is accepted by the
(iv) Application form; 
 planholder; (iv) the o er shall not prejudice
(v) Endorsement of the applicant by the the claim of planholders who do not avail of
principal pre-need company; 
 such o er.

(vi) Copy of the general agency agreement;
 

(vii) a salesman quali ed and licensed by the E. Claims settlement

Commission.
 


 

D. Default and termination
 No pre-need company shall refuse, without

 just cause, to pay or settle claims arising
Lapsed plan refers to a plan that is from its plans nor shall engage in unfair
delinquent in payment of installments claims settlements. The following are
provided in the contract, the delinquency of considered unfair claims settlements: 

which extends beyond the grace period 

provided in the plan. 
 (1) Knowingly misrepresenting to claimants

 pertinent facts or policy provisions relating to
Minimum grace period is 60 days. 

coverage at issue;



Failure to pay within the grace period shall
render the plan lapse. Any payment after the (2) Failing to acknowledge with reasonable
grace period shall be reimbursed to the plan promptness pertinent communications with
holder unless the plan holder reinstates the respect to claims arising under its policies;

plan.



The planholder is given a period of 2 years
from the lapse of the grace period within
which to reinstate his plan. No cancellation
(3) Failing to adopt and implement
reasonable standards for the prompt
investigation of claims arising under its
policies;

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 (4) Not attempting in good faith to e ectuate (b) Amount su cient to pay all net losses
prompt, fair and equitable settlement of reported or in the course of settlement, and
claims submitted in which liability has all liabilities for expenses and taxes; 

become reasonably clear; or
(c) Trust fund. 



(5) Compelling planholders to institute suits For (a) and (b), there must be a certi cation
to recover amounts due under its policies by under oath by the President and the
o ering without justi able reason treasurer. For (c), certi cation by the trust
substantially less than the amounts o cer. 

ultimately recovered in suits brought by 

them.
 Any dividend declared shall be reported to

 the Commission within 30 days from such
Evidence as to the number and types of valid declaration. 

and justi able complaints to the insurance
commission against a pre-need company
shall be deemed admissible in an
administrative or judicial proceeding for
unfair claims settlements practices.



Any violation of the foregoing is cause for
suspension or revocation of the registration. 



When payable: 



Rule1: Upon maturity upon submission of
the required documentary evidence, except if
proceeds are payable in installments or as an
annuity. 

- refusal or failure to pay within 15 days will
entitle the bene ciary thereof to claim
interest at twice the legal interest rate,
except if the refusal is based on the ground
that the claim is fraudulent. 



Rule2: If based on contingent bene t plans,
payable within 30 days after submission of
the proper documents. 



Recovery of investment in case of
insolvency:



Rule1. Court action to recover investments.



Rule 2. Court action directly against the
o cers of the pre-need company if the
insolvency is a mere coverup for fraud or
illegality.



Declaration of dividends:



A pre-company may declare dividends
provided the following shall remain
unimpaired: 

(a) One hundred percent of the capital stock; 

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