FINANCE Secretary Cesar V. Purisima bared a plan on Tuesday to hike the paid-up capital of pre-need companies five times more where they are at present as part of a larger effort to rebuild diminishing confidence in an industry that sells billions of pesos worth of pension, education and memorial plans every year.

Purisima is chairman at the Insurance Commission (IC) where former insurance executive Emmanuel Dooc is its current chief.

Purisima said such a hike was necessary to better protect the investments of thousands of consumers from inadequately managed and poorly capitalized pre-need companies.

“We are looking at the possibility of increasing capitalization of pre-need companies five times from where they are now, depending on the number of plans they are issuing. The Insurance Commission (IC) is already studying it,” Purisima said.

“We need to have a pre-need industry that is sustainable for just like the insurance industry; it is the families investing for their future who will suffer should a company suddenly ask for rehabilitation,” he said.

What he has in mind is a phased capital build-up program over a five-year stretch so that pre-need companies have time to adjust to the higher capital requirement.

He cited Section 9 of Republic Act No. 8929 or the Pre-Need Code of the Philippines which says the IC “may prescribe a higher minimum unimpaired paid-up capital for pre-need companies.”

The Pre-Need Code of 2009 provides that a pre-need company incorporated after the effectivity of the law shall have a minimum paid-up capital of P100 million.

The code, according to Purisima, also prescribed rising “minimum unimpaired paid-up capital” for existing pre-need companies before the law was enacted depending on the number of plans they sell: P50 million for companies selling a single type of plan; P75 million for those with two types; and P100 million for firms offering three plan types.

Existing pre-need companies with traditional education plans, meanwhile, shall have a minimum unimpaired capital of P100 million, he said.

He emphasized that just like the non-life insurance industry, pre-need companies “need to realize that their business is highly capital intensive.”

The same goes to the insurance industry, he added, stressing insurers should start thinking about their clients’ welfare over their own interests.

This pertains to the plight of members of the Philippine Insurers and Reinsurers Association or Pira who have been sore at Purisima for insisting they each maintain a paid-up capital of P175 million.

Only 24 of the 85-member organization have hurdled the threshold capital requirement as of end-2011 although Deputy Insurance Commissioner Vida Chiong said a few others have been added to the list of non-life insurers who met the P175-million minimum capital requirement.