Staying on top

Philam has long been top of mind when it comes to life insurance. But this financial
services giant has a stronghold in pre-need, HMOs, mutual funds, savings banks,
and credit cards. How does this market leader defend its position in the midst of
fierce competition, adverse tax and regulatory environments, and a changing
market? Read on for a quick lesson on strategy and market leadership.
By Heinz Bulos
Iebruary 2004

here`s power in brands. Philamlie
owns insurance` in the minds o
consumers. It`s a classic example
o how a brand, shaped and molded
through decades, can build trust among its
customers.

1rust. Now that word is the ery
oundation o the lie insurance business,
more than most industries. Ater all,
you`re paying a company a hety sum year
ater year or something that you`ll receie
decades into the uture. Ater you`re dead.

Certainly, the Philippine American Lie
and General Insurance Company has
earned that trust. Since 194, this is a
company that has built its name as a
conseratie, inancially sound,
trustworthy insurance proider. It also
happens to be the 800-pound gorilla in
the insurance industry.

1he P16 billion multinational irm is the
largest insurance company in the country
and is among the top ie in reenues
across inancial intermediaries, behind
two local uniersal banks-Metropolitan
Bank & 1rust Co. and Bank o the
Philippine Islands-one global bank-
Citibank N.A.-and one goernment
bank-the Land Bank o the Philippines.
Philamlie ranks 38
th
in terms o reenues
and 24
th
in terms o net income across all
companies in the Philippines.

In the insurance industry, as in banking,
size matters. Consider these numbers:
2002 gross reenues o P16 billion. 1otal
assets o P2 billion. 1otal premium
income o close to P9 billion. Net income
o P3 billion.

1hese igures solidiy the public`s
perception o its brand-that it is sae,
stable, and secure. And that gies Philam
an edge.

President and Chie Lxecutie Oicer
Jose Cuisia, Jr. asserts, 1he strength and
stability o Philam which is backed by
AIG gies us a ery big adantage.`

Philamlie is a member company o the
>6.5 billion AIG, or American
International Group, Inc., the world`s
leading international insurance and
inancial serices organization, the largest
underwriter o commercial and industrial
insurance in the United States, and among
the top-ranked US lie insurers. AIG is
ranked 9
th
in terms o reenues in the
lortune 500 and 1
st
among insurance
companies.

\ithout a doubt, the company dominates
the industry. 1here`s nothing new there.
\hat is interesting, howeer, is how
Philamlie is able to keep its edge.
Certainly, the industry is unrecognizable
rom just a decade ago. 1he market is
dierent. 1he competition is iercer. 1he
economy has changed. 1he regulatory
enironment, though, remains
unaorable. So how does a dominant
market leader continue to thrie in
turbulent times

1
Industry performance
he insurance industry has seen
healthy growth in the early to mid
nineties and een at the turn o the
century. But lately, things hae slowed
down.

1here are no industry igures yet or 2003,
as reports rom the Insurance
Commission, the industry`s regulatory
body, as well as the Insurance Institute o
Asia Paciic ,IIAP, come in quite late.

loweer, Cuisia says, My guess is the
industry still had positie growth, maybe
not as good as the past years. I`m
qualiying it, because in terms o single
premium, probably still ery good growth.
But single premium distorts the igures.`

In the AIG way o reporting single
premium products, Philamlie credits only
10 as irst year proit ,l\P in industry
parlance,, or new business. But other
companies gie it 100 credit. So it`s
quite diicult to compare across
companies.

\hen we put it on a comparable basis,
like 10,` says Cuisia, then I can say our
growth in 2002 was better than industry.`

\hile Philam`s 2003 inancial data hae
not been released as o press time, Cuisia
says the company registered good growth
in terms o premiums and inestment
income. I can just say the Philam showed
good growth when we talk about all our
lines. Oerall, yes, we did better than
2002. \hether we`re higher than industry
or not, I cannot say. In 2002, our growth
was better than industry.`

Still, he adds, 1he growth, i we compare
it to past years, has slowed down, because
the economy has had some impact. 1he
uncertainties hae also aected
particularly the higher income groups.
\e`e seen the growth slow down. Len
in the case o the growth o the Ol\
market has slowed down.`

In the past decade or so, Philamlie posted
the highest growth in the go-go Ramos
years o 1993 to 1994, as well as in 1996.
1hen came the 199-98 Asian crisis. But
things continued to pick up in 1999, when
it registered 3 reenue growth. lrom
1998 to 2002, the company posted a
compounded annual growth rate o 16.
2000 and 2001, howeer, saw only single-
digit growth.

In a way, the industry`s perormance, and
een that o Philamlie, mirrors the state
o the economy. Cuisia notes, 1o a large
extent, there`s a correlation to the
perormance o the economy. lor people,
i they hae more disposable income, they
can buy more insurance. I there`s greater
stability also, that has some impact.`

Competitive market
till, Philamlie leads the industry by a
long shot. In terms o market share,
Philamlie has 26 o the market in
terms o total premiums, according to a
2002 IIAP Statistical Summaries report
based on 2001 perormance. It has 34
o the market based on total assets and
35 in terms o total inestments. It
ranks irst in total premium income,
around P.8 billion in 2001.

1his despite the entry o so many players.
1he ormer Central Bank goernor has
seen radical changes in the industry since
he took the helm. Cuisia says,
Competition is ery dierent. 1here
were 19 new companies that came in. O
course, maybe 8 hae let since then.`

1hat`s how cutthroat the industry is.
1here are too many players or quite a
limited market. Cuisia explains why so
many hae allen by the wayside: 1hey`e
1
S
seen that the market is not as big as
imagined. 1hey look at a population o 80
million, |and say| Oh, that`s a big
number!` But then because o the small
per capita income, the limited disposable
income, it`s not as big as they hae
thought. So, some o them hae let. 1hey
decided to go elsewhere or back to their
home countries.`

1o the beneit o Philamlie, o course.
Right now, the closest rials are Sun Lie
o Canada Philippines Inc. and 1he
Insular Lie Assurance Company. Both
Sunlie and Insular are trailing Philam in
all areas, but are posting impressie
numbers. All the rest pale in comparison.

Cuisia considers Sunlie as more o a
niche player. Sunlie is principally high
net worth. 1hey also do some middle
market. |But| we are in all three markets -
high, middle, lower income. \e deal with
a lot o teachers, military, the police,
goernment employees, and employees o
priate sector companies.` le adds, I
you look at it, they hae a much smaller
agency orce, about 1,500, maybe less. So
they hae a dierent strategy.`

Insular is more similar to Philam, says
Cuisia. 1hey`re also going ater the three
sectors. 1hey hae also oices, maybe not
as many as us, they don`t hae as many
agents.` But Insular is a distant third, with
only` P.9 billion reenues in 2002 and
around P600 million in net income.
Sunlie is closer with P12.3 billion in
reenues and P1.4 billion in net income.

Still, it will take some time or them to
catch up. Len in resources, Philamlie`s
numbers are oerwhelming. Its workorce
is 1,000 strong. \e hae an extensie
branch network all oer the country,`
boasts Cuisia. \e hae oer 8,000
agents. \e are the largest agency group.
No one comes close, I think the second
one would probably be about 4,000 or
5,000 agents. \e hae 200 oices oer
the country. No one again comes close to
that. So those are clearly ery strong
adantages.`

Cuisia credits Philam`s ormer president
or his ision o realizing a Philamlie
policy in eery lilipino home`. 1hat`s
why he set up oices all oer the country,
or at least he started. \e hae o course
added oices since he irst put up
Philamlie. \e eel it`s a responsibility we
hae, to proide protection to eery
lilipino amily. Our market approach is
ery dierent.`

Product innovation
part rom saturating the market
with branches nationwide and an
undisputed army o insurance
agents, Philamlie has kept its lead by
continuing to introduce new products. In
act, it was awarded an ISO 9001:2000
certiicate or its product deelopment
process.

Says Cuisia, Oer the last ten years,
we`e been a product innoator. \e
introduced products in the mid-nineties
that did ery well. Our Scholar Gold, an
educational plan, continues to be one o
our top-selling products. 1hat was
introduced in 1995 or 1996, just a ew
years ater I came in. Pension Builder,
another endowment product, has also
done ery well. 1hese proide liing
beneits.`

Beore, in insurance, you can beneit
only i you die. Now it`s not true, because
there hae been so many products that
hae been introduced - our educational
plans, our pension plans, all o these
proide liing beneits that hae become
ery popular,` explains Cuisia.

A
1he trend in insurance nowadays is whole
lie, which packages a saings component
to straightorward lie insurance. Cuisia
says, Inestment-type products,
particularly in the last two years, hae
become ery, ery popular. \hy Because
the interest rates hae come down so low.
So they`re looking or how they can
enhance the yields o their inestments.
1he single premium products hae
become ery popular. \hy I you put in
a dollar deposit, let`s say in a bank, say >10
thousand. \ou get maybe less than 1.
Put it in time deposit, you might get 2.
\e hae products that proide yield 5-
6 per annum, although o course you
hae to keep the money or a longer time
because it`s a 10-year endowment product.
But this is really saings anyway. So they
get insurance protection, on top o that
they hae a ery good yield. And it`s only
in the last 2-3 years that these products
hae become ery popular.`

Philam, as hae some competing
insurance companies, has mastered the art
o combining lie insurance, inestment,
and pre-need products into packages
based on consumer needs.

In terms o products, we hae a wider
range o products that we can oer,`
Cuisia says. Philam oers inestment
products, education products, protection
products, health products, personal
accident insurance, group lie insurance,
and credit lie insurance. 1here`s right
now a bey o ariations to the
straightorward lie insurance policy and
endowment plan: Pension Builder, Scholar
Gold Adantage, International Scholar,
1ri-Lie, Money Maker Prime, Quick
Cashbuilder, Dollar Pension Builder, Llite
Dollar,
\ealth Preerred, \ealth Adantage,
\ealth Classic, SlL, and Lxcelie Secure.

Alternative channels
lthough its agents continue to
bring in the bulk o its business,
Philam has recently deeloped
alternatie channels, or non-traditional
channels, as Cuisia calls them. 1hese new
channels still account or a ery small
percentage o its business, but these are
the next growth areas or the company.

lor one, there`s its bancassurance
business, partnerships with commercial
banks or the selling and promotion o its
arious insurance products. Last year,
Philamlie established a joint marketing
enture with Security Bank Corporation
,SBC,, called Security Philam linancial
Solutions, to directly market Philamlie
products and serices to SBC clients.

1hen, recently, it acquired 95 o
Lquitable PCI Lie Insurance Co. and
ormed the Philam Lquitable Lie
Assurance Company. Cuisia says they will
start actiely selling policies in Lquitable
PCI Bank branches early this year. le
adds, \e now hae Lquitable, Security.
\e also hae a working arrangement with
lSBC, Philam Saings Bank, and there
are a ew other banks that are interested
to tie up.`

1he competitie adantage o these
bancassurance arrangements cannot be
oeremphasized. Commercial and
uniersal banks haing since been allowed
to sell insurance products o their ailiate
insurance companies-as in the case o
BPI and Ayala Lie-and this has gien
their ailiates a built-in branch network
adantage. \ell, that o course is an
adantage o haing a large customer
base,` admits Cuisia.

But,` he clariies, we hae our own
customer base, we hae branches also.
\hen we tie up with a bank, we enlarge
our customer base. So we tied up with
Lquitable PCI Bank. 1hat`s an additional
A
2 million customers to our. \e hae
roughly around 2 million also within the
Philam Group. So you now hae a 4
million base rather than just 2 million. So
that`s an adantage.`

And obiously, bancassurance will work
more in aor o insurance companies that
do not hae ailiate commercial banks,
such as Philamlie. \hile the product
distribution o the likes o Ayala Lie
might be limited to BPI-as BPI`s
competitors naturally would not aid their
rial-this is not a handicap or
Philamlie. And so, commercial banks that
do not hae insurance ailiates are more
inclined to partner with the likes o
Philam, allowing the company to tie up
with more and more banks, urther
increasing its customer base.

Philamlie is also experimenting with
direct channels. Cuisia says, \e`e also
gone into direct marketing using the credit
card base o Diners Club, lSBC Card,
AIG Credit Card. In eect, what we do is
we send direct mail and then we ollow it
up with telemarketing, another non-
traditional |channel|.`

Cuisia adds that the company has also
started database marketing, sending direct
mail to existing policyholders, up-selling
and cross-selling not just Philamlie
products but products o its ailiates such
as Philam Care and Philam Plans.

\e also do, or example, worksite
marketing,` he notes. \e go to oices
and oer products to the employees
through our agents, which I don`t think
Sunlie does, or een Manulie. \orksite
marketing is, we`re trying to reach
employees in their workplace. So those are
just some dierences in terms o
strategy.`

One ery interesting alternatie channel
that will soon be launched is the OA-S\S
system, which we`ll introduce or our
bancassurance partners that was
deeloped within AIG,` Cuisia shares.
1he system has been deeloped or AIG
ailiates in 1hailand and Malaysia. \e
will just import it in the Philippines,
custom-made or the Philippine situation
but we don`t hae to reinent the wheel.
Not een the other companies hae that.`

1he OA-S\S is a ront end system that
churns out an insurance policy on the ly.
As an example, a potential insurance
customer enters a bank that has a tie-up
with Philam. 1he branch employee asks
or all the releant inormation rom the
customer, then inputs it in the computer.
I it`s considered a standard case, no
medical substandard rating or example,
so there`s no need or a medical checkup,
then it can be underwritten by the system
and a policy can be issued within 15 to 20
minutes.

1his system will cut the costs and speed
up the process o issuing standard
policies, beneiting both Philam and its
customers. Cuisia says the company is
currently testing it and is planning to make
it aailable by the middle o the year.

Neertheless, says Cuisia, 1he bulk o
the production comes rom the agency
channel, at least or us. In some other
companies, perhaps they rely on
bancassurance more than agency. In our
case, it`s still agency-drien.`

Diversification
nother strategy that has clearly
worked or Philam is
diersiication. Right now, Philam
is the most diersiied insurance company
in the Philippines, bar none.

A
Its businesses run the gamut o inancial
serices: pre-need plans ,Philam Plans, set
up in 1989,, health care ,Philam Care,
1982,, banking ,Philam Saings Bank,
1994,, credit cards ,AIG Credit Card
Company, 1998,, asset management
,Philam Asset Management,199,,
property and casualty insurance ,Philam
Insurance, 1961,, property deelopment
,Philam Properties, 1995,, and most
recently, business process outsourcing
,AIG Business Processing Serices,.

Not many people know that Philam is
number one in many o these businesses.
Cuisia says, Clearly or the last two years,
Philam Plans has been number one in
terms o sales oerall.`

1he company dominates the pension plan
market with a total olume o P5.5 billion,
or 24. market share. It`s third in
education plans with 1.9 market share.

Philam is the largest lMO in the country.
\e`e been number one or a long
time,` says Cuisia. In 2002, Philam Care
reported reenues o P1.1 billion.

In terms o Philam Asset Management,
we are number two, but slightly behind
BPI,` notes Cuisia. But we`re a much
younger organization, about 10 years. In
asset management we`re number two but
in terms o shareholder base, we`re
number one because we hae about 3
o the market. \e hae more o the retail
inestors. BPI is more institutional. In
terms o assets under management, they`re
bigger. But they only hae about 2,000
plus, mostly institutional. \e`re ery
clearly a retail-oriented mutual und.`

Philam Asset Management manages the
Goernment Serice Insurance System
,GSIS, mutual und along with its own
our unds-Philam Strategic Growth
lund, Philam lund, Philam Bond lund,
and Philam Dollar Bond lund-which
incidentally hae been perorming well.
In act, it has grown so well because the
yields are ery good compared to bank
deposits,` Cuisia points out. It grew
tremendously rom P2.6 billion in assets
under management just three years ago to
P.2 billion in 2002. Lstimates or 2003 is
a record-breaking P1 billion.

Philam Insurance is number our in terms
o Gross Premiums \ritten in non-lie
insurance ,Malayan Insurance Co.
continues to rule this segment,, posting
reenues o P1.9 billion in 2002 and 243
million in net income.

Philam Saings Bank is number ie
among saings banks, reporting reenues
o P1.2 billion in 2002. BPI lamily
Saings Bank is the market leader here. In
credit cards, AIG Credit Card Company is
number our in the recent Credit Card
Association o the Philippines report, with
P1.2 billion in reenues, trailing market
leader Bankard, Inc.

O course, the objectie is or them to
moe up, because we want to be either
number 1 or number 2,` points out
Cuisia. 1hat`s similar I guess to the
strategy o Jack \elch o GL. \ou`d
better be number one or get out. I they
don`t reach it ater a certain time, then you
better get out o that business.

\ith the smaller Banco de Oro`s buy-in
into Lquitable PCI Bank, it seems ripe or
Philam Saings Bank to take a more
aggressie route to expansion. So ar,
Philam Saings Bank has grown
organically, moing rom number 11 to
number 5 in 2001. Cuisia explains, \e
are a ery conseratie group. \e study it,
and ask, Can we do it` \e would rather
grow cautiously but surely. Philam Saings
Bank has grown ery well. It`s slow but
sure. 1hat`s basically the approach AIG
takes. \e are a consumer bank. \e`re not
a commercial bank, we`re not a uniersal
bank. 1here`s no intention. Clearly, we
don`t want to be a commercial bank.
\e`re more o a consumer bank and that`s
what we want to ocus on. But in terms o
consumer business, we`e grown quite
well, meaning auto loans and credit cards,
that`s basically the business we`re in.`

Neertheless, this time, it is considering a
strategy o growth by acquisition. Philam
Saings Bank is being run directly by
AIG`s Consumer linance Group, where
Cuisia sits on the board. So decisions hae
to made with the New \ork oice. In
act I`m meeting the Asian head today to
discuss that precisely, what would be our
strategy,` he shares. Should we acquire
to be able to grow quickly Should we
establish now that branches are not being
allowed by the Central Bank 1hat doesn`t
leae us much choice. Probably we hae
to buy a portolio or buy branches or buy
banks. 1hat`s one o the things that we
hae to discuss.`

le adds, I eel personally, yes, we
should. lor us to be able to number one,
we need to expand, we need to look or
good merger partners, or buy portolios o
some banks that may be hard up. \e can
buy into the bigger banks. See, money o
course is not a problem or Philam.
Precisely they want a ery clear, ery
deliberate strategy that will outline how
we are we going to get there. I we want
to be number one, how do we get there`

Cuisia shares that within its other
businesses in health care and pre-need,
Philam is also looking or acquisitions
because we hae the adantage o haing
deep pockets, and we hae the expertise.`

It has, o course, done quite a number o
such and similar deals in the recent past,
taking oer the portolio and
administration o ING`s health care
business, buying the lie insurance
business o Lquitable PCI Bank, and
orming a joint enture with Security
Bank.

It`s been setting up a number o new
companies lately. 1here`s Philam linancial
Adisory Serices ,Philam linancials,,
which is building up a team o inancial
adisors that will proide inancial
planning and wealth management to
clients. And there`s AIG Business Process
Serices Inc. which does the backroom
operations o American General, another
AIG company in the US, which is the
second largest lie insurer in the US.
Philam is doing 24 backroom processes,
including claims processing, data entry
and indexing, premiums processing, and
policy administration, and has taken oer
two o their call centers in the US. So
those are now being handled in the
Philippines. And o course this is added
dollar reenues or us, |and| creation o
jobs,` points out Cuisia. Originally, the
plan was to hae 250 employees by the
end o 2003. 1he company started January
2003, and it ended the year with about
350. Cuisia oresees that this year, that
number will double. It`s a rapid
expansion. And that is one area where the
Philippines has a competitie edge.` le
adds, 1hey are also ery happy with the
quality o our serice. 1he idea is to try to
expand that een more. \e`ll be doing
more, not just or American General but
or other AIG companies. So that`s
another area o growth or Philam.`

1he battle cry this time is synergy. \ith so
many inancial products and serices, the
Philam Group o Companies is in an
excellent position to boost reenues and
proits by selling to its oer two million
customers-cross-selling and up-selling
across product lines. Lery ailiate is
responsible and made accountable or
selling products deeloped by other
ailiates.

Operations are being integrated,
establishing its lagship property Philam
1ower as a one-stop-shop and payment
hub or customers. It`s training agents
who will be licensed to sell any Philam
product across all ailiates.

So ar, the inancial serices giant has not
altered in its strategy. Despite its size, it
continues to be nimble, een innoatie
despite its long history. It may not be as
aggressie as other players, but in this
business, it`s oten prudent to lean on the
side o caution. Some say the bigger they
are, the harder they all. In the case o
Philam, the contrary is true: the bigger
they are, the higher they climb.

SIDLBAR
Industry challenges
the showbiz industry loes to
complain about being the most
heaily taxed industry in the country,
consider also what the insurance industry
has to put up with.

Jose Cuisia Jr., President and CLO o
Philamlie, explains, I you look at the
percentage o the population insured,
we`re among the lowest in Asia. Perhaps
there`s not enough awareness o the
importance o insurance. Perhaps it`s also
the act that the goernment has not
supported the industry.`

lor one, the local insurance industry is the
heaiest taxed in any country in Asia.
1here`s the 5 premium tax. 1he other
countries in Asia don`t hae that. So
that`s a disincentie,` stresses Cuisia.
1hey say insurance products can be
bought outside at a lower cost because
there`s no 5 tax.`

1hen there`s the Documentary Stamps
1ax, or DS1, which is higher than most
other countries. In Singapore, or
instance, the DS1 is S>1 regardless o the
amount o the policy. lere, or a P1
million policy, with say a P5 thousand
premium, the tax is not on the P5
thousand but on the P1 million ace
amount. So it`s really ridiculous,`
exclaims Cusia. So that`s why we`re
saying the lie insurance industry in the
Philippines is the heaiest taxed lie
insurance industry in Asia. And that has
somehow worked to the disadantage o
the industry and o course the economy.
1hat`s why we hae the lowest saings
rate, because lie insurance is a good
ehicle or saings, long term saings, yet
the goernment has not done anything to
help.`

Recently, the Congress passed a DS1 bill
that eectiely changed the tax basis,
rom the ace amount to the premium.
Cuisia asks, But why only now \hy did
it take so long Just to show you there`s
really no clear goernment strategy to help
insurance.`

All the goernment does is promote such
supericial campaigns as Saings
Consciousness \eek`, says Cuisia, But
where are the policies`

1here`s also the case o the premium tax.
1he industry got the louse o
Representaties to pass a bill that would
abolish the premium tax, but the Senate
did not pass it. And this happened twice
already.

Another example: in other countries, they
don`t hae a 20 tax on inestment
income. Insurance companies buy a lot o
goernment securities, which is subject to
20 tax.

I
So add the premium tax, the DS1, the
inestment income tax, and the corporate
income tax, and there`s a great
disincentie or consumers to buy
insurance and a huge hindrance to the
growth o the insurance industry.

In Singapore, they actually encourage
their people to buy insurance. 1hey can
een borrow against their Central
Proident lund to buy insurance. 1hat`s
why the Singapore insurance industry has
grown much, much bigger than the
Philippines een i they only hae about 3
million people. Because clearly
goernment policies are designed to
encourage the purchase o lie insurance.
1hat`s not true in the Philippines,`
complains Cuisia.

1hen, there are the regulatory barriers.
1he licensing process or insurance agents
or instance takes a long time. Again in
other countries it`s much, much quicker,`
Cuisia points out. So how can we
encourage more people to become
insurance agents`

Lery year, they hae to renew their
license, eery year they hae to put in the
same inormation. And it`s all manual,
that`s why it takes so long,` he adds. Can
you imagine \e hae 32 thousand agents
in the industry.`

1he Insurance Commission, ortunately,
inally will automate the process. And
while the Commission has agreed that
agents no longer hae to renew their
license eery year, they`re still required to
do so eery three years. Cuisia argues that
this should be done only when the license
is reoked, as in the case o proessionals
such as doctors and lawyers. But that`s
still an improement,` he concedes.

Another area Cuisia hopes will be
corrected relates to sales literature and
promotion. Philam currently doesn`t hae
ariable lie insurance products, that is,
inestment-linked or unit-linked products,
so called because the amount o beneits
is tied up to the perormance o the
inestment und a policy owner gets to
choose.

\e hae not been as aggressie because
what that entails is probably an oerly
aggressie approach to risk,` Cuisia
explains. Some companies oer yields
that are probably oerly aggressie, which
is o course ery dangerous. \hile it is
clear that they say it is not guaranteed,
some customers don`t understand that it`s
not guaranteed. And they hear yields like
15. \ow, that`s so good.` But that`s not
realistic.`

low can you earn 15 \ou know that i
you take in long term lX1N |ixed
income treasury notes|, which yields you
11.2 and you put the 20 |tax on
inestment income|, that`s about 8.9,
how can you get 15 Unless you`e put
in some risky inestments like non-prime
stocks.`

I`m just explaining, I`m not accusing
anyone,` he clariies, but cautions against
possible misrepresentation.

Cuisia proposes that in illustrations, there
must be some guidelines rom the
Insurance Commission or the industry to
put caps. lor example, a realistic yield may
be 10. 1hat means nobody can illustrate
beyond 10. But now, there are no such
guidelines. \ou hear companies
illustrating at 15,` he says.

A major cause o concern howeer is the
battered image o the pre-need industry.
\hy has the pre-need industry grown
It`s so much easy to become a pre-need
counselor,` explains Cuisia.

Ater a hal day training, the pre-need
company certiies that they`e gone
through training and then they`re gien a
license by the SLC. 1here are no licensure
exams to take and pass.

1hat`s why they hae oer a 100
thousand sales counselors,` says Cuisia.
1he problem though is, are those
counselors properly trained 1hat`s why
they`e grown so rapidly.

le adds, But on the other hand, the pre-
need industry has suered a negatie
image particularly the past two years
because o the reported trust deiciencies.
Some pre-need companies hae not been
able to meet the required trust
contributions that they hae to make to
their trustee banks. \hat does this mean
Some o these companies may not hae
suicient reseres to meet their
obligations. Because o that, the whole
industry is in a negatie cloud. 1hat`s why
last year there`s been a negatie growth in
the industry. According to the reports I`e
seen, about 21 negatie growth
compared to the preious year, because
precisely the public has become ery wary.

1his is ery unortunate because the well-
managed companies hae been aected,
according to Cuisia. Philam Plans has
been ery good. \e hae always met the
requirements o our trust contributions
eery year, yet because the industry is in a
cloud, Philam Plans has also been
aected. 1he growth has slowed down
considerably, compared to past years
when we were going 20. Now certainly
the growth will be below 20, but still
we`re better o because we hae positie
growth.`

Because o these problems, the lederation
o Pre-need Plan Companies, Inc.
,PlPPC, proposed to establish P5 billion
liquidity und that would bail out
inancially distressed pre-need companies.
It will issue a guarantee bond that would
be used by members to coer trust und
deiciencies. A liquidity pool will be
established along with it, and this be
unded by members and multilateral
agencies.

\e`re not in aor o that,` Cuisia
stresses, because companies that hae
been mismanaged will beneit rom that.
I we`e been prudently managing our
inances, why should we be asked to
contribute to a und to bail out these
companies which hae not been properly
managing their inances I`m not
agreeable to that.`

\eaker players should old up or be
gobbled up by bigger irms. I think it`s
ineitable,` Cuisia says. 1here`s got to be
urther consolidation within the industry.`