College Assurance Plan Scandal PDF

x x x x x x x x x x COLLEGE ASSURANCE PLAN SCANDAL PENELOPE DY DENISE LAVADO TABLE OF CONTENT This is the material point that will be delivered in the presentation 1. INTRODUCTION 2. WHAT HAPPENED TO CAP 3. AFTERMATH 4. RECOMMENDATIONS AT xx x xx x M xx COLLEGE ASSURANCE PLAN (CAP) WHAT IS CAP? Trad...

x x x x x x x x x x COLLEGE ASSURANCE PLAN SCANDAL PENELOPE DY DENISE LAVADO TABLE OF CONTENT This is the material point that will be delivered in the presentation 1. INTRODUCTION 2. WHAT HAPPENED TO CAP 3. AFTERMATH 4. RECOMMENDATIONS AT xx x xx x M xx COLLEGE ASSURANCE PLAN (CAP) WHAT IS CAP? Traditional pre-need plan conceived in 1980 Inflation-free savings vehicle that guarantees payment to the school of tuition fees CAP 1 Building, 126 Amorsolo Street, Legazpi Village, Makati, Metro Manila HOW DID IT FUNCTION? Small, recurring payments from clients in exchange for assurance that their children’s tertiary education will be paied completely TUITION DEREGULATION (1992) Prior to 1992, college fee increases averaged 10-15% annually. In 1992, DO 16 allowed schools to set tuition fees independently, leading to drastic increases. Between 1990 and 1995, average tuition surged by 275%, and by 26% from 1996 to 2000. Pre-need premiums couldn't keep up, causing coverage gaps. Competitors adjusted plans, offering fixed WHAT HAPPENED TO CAP? value options. CAP stuck to full tuition coverage, aiming to maintain market superiority. CAP's refusal to adapt eventually contributed to its downfall. WHAT HAPPENED TO CAP? $ ASIAN FINANCIAL CRISIS (1997) The Asian financial crisis of 1997 affected pre-need insurance firms like CAP. Economic instability and market volatility challenged CAP's financial stability. CAP struggled to fulfill its obligations due to the crisis's impact. CAP's real estate investments suffered significant losses during the crisis. Despite setbacks, CAP managed to continue operations with capital from alternate sources. $ $ FINANCIAL CRISIS During it’s prime, the company invested in real $ $ estate and trust funds, however during the crisi $ WHAT HAPPENED TO CAP? these were not sufficient to cover client payments. CAP allegedly invested more than what was allowed by regulators(SEC) and in real estate businesses owned by board members, resulting in a conflict of interest. ACTUARIAL RESERVE LIABILITY The Actuarial Reserve Liability, established by the SEC in 2002, was applied to CAP, causing insufficient funds for future obligations. In 2004, CAP faced difficulties meeting client obligations, leading to educational institutions terminating agreements. The SEC revoked CAP's license, causing delays in claims payments. Despite P4.1 WHAT HAPPENED TO CAP? billion in liabilities, CAP-Education committed to paying tuition obligations until 2012. $ AFTERMATH 1. 2. 3. CAP's parent company filed a Petition for Rehabilitation with the Makati Regional Trial Court the regulation of the insurance business was shifted to a new insurance commission, along with the Philippine Pre-Need Code CAP's clients have been demanding payment for unclaimed payoffs, despite a rehabilitation plan approved by Makati RTC in 2013. However, a Temporary Restraining Order by the Supreme Court has halted payments to clients, causing anger. $ $ $ $ $ $ $ $ RECOMMENDATIONS 1. 2. Transparency and Disclosure Risk Management 3. Compliance and Regulation 5. Continuous Monitoring and Evaluation 4. Education and Awareness THANK YOU! REFERENCES https://www.esquiremag.ph/money/industry/cap-college-assurance-plan-what-happened-a00289-20220110-lfrm https://businessmirror.com.ph/2017/12/04/phl-pre-need-insurance-industry-reconciling-past-for-brighter-future/ $