CHAPTER I DEFINITION PRE-NEED COMPANIES

PRE-NEED PLANS PRE-NEED COMPANY

Pre-need plans are contracts, agreements, deeds or plans for the benefit
of the planholders which provide for the performance of future services,
payment of monetary considerations or delivery of other benefits at the time
of actual need or agreed maturity date, as specified therein, in exchange for
cash or installment amounts with or without interest or insurance coverage and
includes life, pension, education, interment and other plans, instruments,
contracts or deeds.
A Pre-need Company refers to:
a. Any corporation registered with the Commission and authorized/licensed to
sell or offer to sell pre-need plans
b. Schools, memorial chapels, banks, nonbank financial institutions and other
entities authorized/licensed to sell or offer to sell pre-need plans insofar as their
pre-need activities or business are concerned.

Form CHAPTER II REGISTRATION OF PRE-NEED PLANS

Contracts
Agreements POWERS OF THE COMMISSION
Deeds i. Promulgate rules governing the registration of pre-need plans and the required
Plans documents. Said rules shall further set forth the:
Beneficiary Planholder/s a. Conditions under which such registration may be denied revoked, suspended
Purpose or withdrawn;
To provide for the: b. Remedies of pre-need companies in such instances;
- Performance of future ii. Approve all forms, including amendments, relating to the pre-need plans.
services [Sec. 14 &
- Payment of monetary 17]
considerations; or
- Delivery of other
REQUIRED DOCUMENTS FOR REGISTRATION
benefits
a. The viability study
When
b. Certification, under oath, of a pre-need actuary accredited by the Commission
benefits may
c. A copy of the pre-need plan
be availed
d. Any information brochure
At the time of actual need
e. Information and documents necessary to ensure the protection of planholders
OR
and the general public [Sec. 14]
On agreed maturity date
specified therein
Consideration NECESSITY OF REGISTRATION
Cash or installment a. To be granted a license to do business as
amounts with or without a pre-need company
interest, OR b. To file a registration statement with the
Insurance Coverage Commission for the sale of pre-need
Types plans
Life - This is required for every pre-need
Pension plan which the company intends to
Education offer for sale to the public [Sec. 14]
Interment 2. When Registered
Other plans, instruments, Within a period of forty-five (45) days after the
contracts, or deeds grant of a license to do business as a pre-need
company. [Sec. 14]
3. Registration Requirements
The Commission shall require the following
PRE-NEED PLANS documents, among others:
(a) Duly accomplished Registration
Pre-need plans are contracts which provide for the rendering of services or Statements;
payment of money to plan holders or their beneficiaries when the actual need (b) Board resolution authorizing the
for such payment or rendition of services accrues. registration of applicant’s pre-need plans;
They are governed by the Pre-Need Code (RA 9829). (c) Opinion of independent counsel on the
legality of the issue;
NOT INSURANCE CONTRACTS (d) Audited financial statements;
They are not considered as insurance contracts because: (e) Viability study with certification, under oath,
a. Pre-need plans can have insurance of pre-need actuary accredited by the
coverage, implying that they are separate Commission;
contracts; and (f) Copy of the proposed pre-need plan; and
b. Pre-need plans do not involve unknown or (g) Sample of sales materials.
contingent events but events certain to Such registration statements and sales
happen at a certain time. materials required under this section shall
However, all Pre-need plans are under the contain the appropriate risk factors as may be
primary and exclusive power supervision and determined by the Commission. [Sec. 15]
regulation of the Insurance Commission. [Sec. 4. Accreditation of Actuary
5, RA 9829. In addition, the Insurance An actuary prepares and certifies, under oath,
Commissioner shall have the primary and the viability study required for registration.
exclusive power to adjudicate any and all [Sec. 15]
claims involving pre-need plans. If the amount
of benefits does not exceed P100,000, which Requirements to be a Pre-Need Actuary:
decision shall be final and executory. [Sec. 55] i. Must be accredited by the Commission.
[Sec. 15]
ii. Must NOT be engaged by the pre-need

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company as actuary, and at the same time:
 Be a stockholder; or
 Serve as:
a. Director of the board
b. Chief executive officer or
c. Chief financial officer of the
company, or
d. Any such position that the
Commission may determine to
have an inherent conflict of
interest to the position of an
actuary. [Sec. 16]
The Commission shall have the power to:
1. Set standards for the accreditation of
actuaries directly responsible for the
preparation and certification of the viability
study of the pre-need plan submitted by the
pre-need company for registration or
amendment with the Commission;
2. Define the obligations and liabilities of
actuaries accredited by it.
5. Pre-Need Advertising Rules
Pre-need plans shall be advertised and sold in
an appropriate non-misleading manner in
accordance with the rules to be prescribed by
the Code.

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 D. DEFAULT AND
CHAPTER III LICENSING OF SALES COUNSELORS AND TERMINATION
GENERAL AGENTS (a) Materially misrepresented statements in
the application requirements;
It shall be unlawful for any pre-need company to advertise itself or its pre-need (b) Obtained or attempted to obtain a license
plans unless the Commission has approved such advertising material. by fraud or misrepresentation;
The Commission shall have a period of ten (10) working days to approve or (c) Materially misrepresented the terms and
deny the advertising material and failure to act within the said period shall conditions of pre-need plans;
cause the advertising material to be approved. For purposes hereof, the (d) Sold, solicited or attempted to solicit or sell
Commission shall have the power to define the scope of its advertising rules to a pre-need plan by means of false or
appropriately cover advertising or other communications to the public. misleading representation and other
Any person who sells or offers to sell any preneed plan or contract by any means fraudulent means;
or instruments of communication in violation of this section shall be liable to the (e) Terminated for cause from another preneed
person purchasing such pre-need contract who may sue to recover the company;
consideration paid for such pre-need contract with interest thereon. In addition (f) Similar grounds found in Section 11 of RA
hereto, the Commission shall have the power to pursue the erring pre-need 9829;
company in an administrative or criminal proceeding. A fine of P100, (g) Wilfully allowing the use of one’s license by
000,000.00 shall be imposed on any pre-need company found to have violated a non-licensed or barred individual;
this section: Provided, That a second violation of this section shall, in addition to (h) Analogous circumstances. [Sec. 21]
the fine imposed, result in the suspension of the license of the pre-need company. 3. Licensing of General Agents
[Sec. 18] If the issuer should contract the services of a
general agent to undertake the sales of its
DISCLOSURES TO PROSPECTIVE PLANHOLDERS plans, such general agent shall be required to
No registered pre-need plan shall be sold to prospective planholders unless an be licensed as such with the Commission, in
information brochure, which has been filed with the Commission, has been accordance with the requirements imposed by
provided to the purchaser. the Commission. [Sec. 22]
The information brochure shall contain: 1. Default; Reinstatement Period
a. An explanation of the principal features of the pre-need plan; Grace Period
b. A statement that the planholder may avail of a default or reinstatement The pre-need company must provide in all
period within which to reinstate his lapsed plan; contracts issued to planholders a grace period
c. The conditions of the same and the rates of return for scheduled benefit plans of at least sixty (60) days within which to pay
and illustrative yields for contingent benefit plans; accrued installments, counted from the due
d. Such other information that the Commission shall require by rule. [Sec. 19] date of the first unpaid installment.
The making of any untrue statement of a Nonpayment of a plan within the grace period
material fact in an information brochure is a shall render the plan a lapsed plan.
ground for administrative sanctions and Any payment by the planholder after the grace
criminal penalties. [Sec. 56(a)(i), IRR of RA period shall be reimbursed forthwith, unless the
9829] planholder duly reinstates the plan.
1. Qualifications for Issuance Reinstatement
No sales counselor shall be allowed to solicit, The planholder shall be allowed a period of not
sell or offer to sell pre-need plans under this less than two (2) years from the lapse of the
Code without being licensed as such by the grace period or a longer period, as provided in
Commission. the contract within which to reinstate his plan.
Such license shall automatically expire every No cancellation of plans shall be made by the
30th day of June or such date of every year as issuer during such period when reinstatement
may be fixed by the Commission and may be may be effected.
accordingly renewed. Notice Requirement
Qualifications for the issuance of a license: The pre-need company shall give written notice
a. The applicant must be of good moral to the planholder that his plan will be cancelled
character and must not have been if not reinstated within two (2) years.
convicted of any crime involving moral Two notices shall be given:
turpitude;  Within thirty (30) days from the expiration
b. The applicant has undergone a training of the grace period; and
program approved by the Commission and  Within thirty (30) days from the expiration
such fact has been certified under oath by of the reinstatement period, which is two (2)
a duly authorized representative of a preneed years from the lapse of the grace period.
company; and Failure to give either of the required notices
c. The applicant has passed a written shall preclude the pre-need company from
examination administered by the treating the plans as cancelled. [Sec. 23]
Commission: Provided, that the 2. Termination of Pre-Need Plans
administration of the examination may be A planholder may terminate his pre-need plan
delegated to an independent organization at any time by giving written notice to the
under the supervision of the Commission. issuer. [Sec. 24]
[Sec. 20] Termination Value
2. Denial, Suspension, or Revocation of The termination value of the pre-need plan
License shall be predetermined by the actuary of the
An application for the issuance or renewal of a pre-need company upon application for
license to act as sales counselor may be registration of the pre-need plans with the
denied, or such license, if already issued, shall Commission and shall be disclosed in the
be suspended or revoked based on the contract.
following grounds: A pre-need plan shall contain a schedule of
U.P. LAW BOC TRANSPORTATION LAW COMMERCIAL LAW termination values to which the planholder is
Page 53 of 450 entitled to upon termination.

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Such schedule of termination value shall be owners of the said pre-need company. [Sec.
required for all in-force pre-need plans and 27]
shall be fair, equitable and in compliance with 4. Consequences of Delay or Default
the Commission issuances. [Sec. 24] In case of any litigation for the enforcement of
U.P. LAW BOC TRANSPORTATION LAW COMMERCIAL LAW any pre-need plan, it shall be the duty of the
Page 54 of 450 Commission to determine whether the
1. Unfair Claims Settlement Practices payment of the claim of the planholder has
No pre-need company shall refuse, without just been unreasonably denied or withheld.
cause, to pay or settle claims arising under The failure to pay any such claim within the
coverages provided by its plans nor shall any time prescribed in Section 26 hereof shall be
such company engage in unfair claim considered prima facie evidence of
settlement practices. unreasonable delay in payment. [Sec. 27]
The following acts constitute unfair claims If found to have unreasonably denied or
settlement practices: withheld the claim, the pre-need company shall
1. Knowingly misrepresenting to claimants be liable to pay damages, consisting of actual
pertinent facts or plan provisions relating to E. CLAIMS SETTLEMENT
coverages at issue; U.P. LAW BOC TRANSPORTATION LAW COMMERCIAL LAW
2. Failing to acknowledge with reasonable Page 55 of 450
promptness pertinent communications with damages, attorney’s fees and legal interest, to
respect to claims arising under its plan; be computed from the date the claim is made
3. Failing to adopt and implement reasonable until it is fully satisfied.
standards for the prompt investigation of 5. Distribution of Profits
claims arising under its plan; A pre-need company may declare
4. Failing to provide prompt, fair and equitable divided: Provided, That the following shall
settlement of claims submitted in which remain unimpaired, as certified under oath by
liability has become reasonably clear; or the president and the treasurer with respect to
5. Compelling planholders to institute suits or items (a) and (b); and in the case of item (c), by
recover amounts due under its plan by the trust officer:
offering, without justifiable reason, (a) One hundred percent (100%) of the capital
substantially less than the amounts stock;
ultimately recovered in suits brought by (b) An amount sufficient to pay all net losses
them. reported, or in the course of settlement,
Any violation of this section shall be considered and all liabilities for expenses and taxes;
sufficient cause for the suspension or and
revocation of the company's certificate of (c) Trust fund.
authority. [Sec. 25] Any dividend declared under the preceding
2. Payment of Plan Proceeds paragraph shall be reported to the Commission
Scheduled Benefit Plans within thirty (30) days after such declaration.
General Rule: In the case of scheduled benefit [Sec. 29]
plans, the proceeds of the plan shall be paid
immediately upon maturity of the contract.
Exception: Unless such proceeds are made
payable in installments or as an annuity, in
which case the installments or annuities shall
be paid as they become due.
Contingent Benefit Plans
In the case of contingent benefit plans, the
benefits shall be paid by the pre-need company
thirty (30) days upon submission of all
necessary documents. [Sec. 26]
Refusal or Failure to Pay
General Rule: Refusal or failure to pay the
claim within fifteen (15) days from maturity or
due date will entitle the beneficiary to collect
interest on the proceeds of the plan for the
duration of the delay at the rate twice the legal
interest.
Provided, That the planholder has duly
complied with the documentary requirements
of the pre-need company.
Exception: Unless such failure or refusal to
pay is based on the ground that the claim is
fraudulent.
3. Recovery of Investment
The planholder may institute the necessary
legal action in court to recover his/her
investment in the pre-need company thirty (30)
days upon submission of all necessary
documents.
However, in case the insolvency or bankruptcy
is a mere cover-up for fraud or illegality, the
planholder may institute the legal action
directly against the officers and/or controlling