GSIS to review pre-need plan program

BY KATRINA MENNEN A. VALDEZ REPORTER

STATE-RUN Government Service Insurance System (GSIS) said it will review its policy on educational plans to improve the product offering.

Citing his dialogue with pension fund members, Robert Vergara, GSIS president and general manager, said that educational plans remain one of the major concerns.

“We decided that we will review the pre-need plan, and see whether there are ways we can make the service that we’re providing for those who hold these policies better,” Vergara said.

He said GSIS members have been complaining about the removal of the inflation-protection feature of the pre-need plan.

“Part of this investigation is to determine what is the potential maximum liability that we can get, if we actually pay it 100 percent?” Vergara said.

He said the study made the assumptions that everybody using the pre-need plans went to the most expensive schools in their respective categories, and tuition was growing at the highest rate of 25 percent over the last 15 years.

“That’s where the number P15 billion came from . . . that GSIS has P15 billion in educational loans. But we all know that not everybody is going to study in the most expensive schools, and with moderation in inflation, tuition is not rising by as much as 25 percent or 30 percent anymore. In fact they’re rising more like small single-digits now,” Vergara said.

He said that the review aims to determine the potential maximum drawdown and the different possible combinations of schools in the various categories.

“What we’re trying to do is, we’re trying to respond to the complaints that we hear, and you know that’s why we opened this issue about pre-need policies and we’re trying to look at ways to really come up with a proposal that our policy-holders might find to be fair,” he said.

“We’ll look at all these different combinations and we’re going to come up with an enhancement that might be more acceptable to our policyholders.”

The GSIS’ educational pre-need plans were sold to its members in 1993 and were priced in an environment in which school tuition was still regulated.

However, shortly after the pension fund issued the educational policies, tuition was deregulated, as a result of which rates increased by seven times in just a year. Thereafter, fees went up by 15 percent to 25 percent annually.

Hence, the GSIS stopped selling pre-need plans in 1998.

“We sold in that five years about 165,000 of these plans. Like everybody else active in this space, there were problems. But unlike most people who had problems who decided that they would just refund, or declare themselves bankrupt or unable to pay, we continued to service the educational plans,” Vergara said.

He said the previous administration decided to take certain policy steps to make the educational plans less of a financial burden to the fund.

“They looked at what they’ve collected, they looked at what it was earning, and then they interpreted the benefits in such a way that they put a cap on the amount of tuition that would be reimbursed,” Vergara said.

He said the previous administration categorized the schools and took the average tuition that the schools in the different categories were charging.

“So we had the exclusive schools like Ateneo de Manila, La Salle University, St. Scholastica’s College, University of the Philippine and Assumption College. Those were the exclusive schools when the policies were sold. Then you have the semi-exclusive schools, and then the government schools,” Vergara said.

For example, the average tuition for the exclusive schools category was P36, 000 a term, or P72, 000 for a two-term school year. This year, the amount for reimbursement in the same category would go up to P38, 300.

He said that contrary to other pre-need companies’ practice of recinding or walking away from their obligations, GSIS is still servicing the claims by paying the plan holders the average tuition.

“But because our members are still unhappy about what we’re doing, the board decided we’re going to re-open this issue, we’re going to study it, and come up with a plan, hopefully a better offer,” Vergara said.