IC allows mutual benefit associations to procure pre-need

The Insurance Commission (IC) is now allowing mutual benefit associations (MBAs) to purchase additional benefits for their members in the form of pre-need plans, as a way of distributing their free and unassigned surplus.

Under the Insurance Code of the Philippines, an MBA can only maintain a free and unassigned surplus of not more than 20 percent of its total liabilities. Any excess of the amount should be returned to its members by way of dividends, enhancement of equity value, or provision of benefits and other relevant services.

The IC, as stated in Circular Letter 201841, said MBAs that choose to return the surplus by providing additional benefits may now opt to procure any type pre-need plans for their members.

Furthermore, the IC said these pre-need plans may be considered as admitted assets of the MBA, provided that the plans were procured only using the excess free and unassigned surplus.

“Only MBAs with free and unassigned surplus that is more than the 20 percent ceiling...can procure pre-need plans as a member benefit,” the circular, which was signed last July 31, 2018, stated.

Before proceeding with the procurement, an MBA should first submit a letter addressed to the insurance commissioner manifesting its intention to procure preneed plans as a way to distribute its surplus.

The letter should include the name of the pre-need company selling the pre-need plan, the type of pre-need plan it intends to procure, the number of pre-need plans and amount of transaction involved.

There should also be attached a written undertaking certifying that the MBA has a free and unassigned surplus in excess of the 20 percent ceiling, a certified true copy of the duly notarized board resolution of the MBA authorizing the purchase of the pre-need plans, and a copy of the latest IC-approved financial statement.

The IC will approve or disapprove the proposal within 15 days from the receipt of the requirements.