Microinsurance

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• Microinsurance
• in
• Brazil

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• Brazilian Population Outlook

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BrazilianInsurance Market Overview
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Insurance, Open Private Pension Funds and
Capitalization Sectors Participation in the GDP
3,10
2,97
2,53
1,00
2006
1995
2000
1994
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Market Overview









Market Number
Insurance Companies 115
Open Pension Funds 26
Capitalization Companies 18
Insurance Agents (Individuals) 39.518
Insurance Agencies (Companies) 22.131
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Market Premium Evolution (millions R)
64.607
56.927
52.308
32.758
28.259
16.331
10.035
1995
1994
2005
1995
2006
2004
2000
1999
...
...
1,00

US 29,676 MM - 2006
...
US 2,1771
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Brazilian Market Perspectives
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Microinsurance or Seguro Popularin Brazil

• Included in the
• Brazilian Government policy
• for micro-finances

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Government Policy for Microinsurance

• General Insurance products for the low-income
  people and for the formal and informal
  micro-entrepeneurs (SUSEP)
• Rural Area products to protect low-income
  family farmers (MDA Ministry of Agrarian
  Development)

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SUSEPs First Actions

• End of 2003 internal discussions aiming at the
  design of simple and low-cost products
• September/2004 - Circular SUSEP 267/2004
  popular group life insurance product
• November/2006 - Circular SUSEP 306/2006 -
  popular automobile product

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Parallel Incentives

• Alternative distribution channels
  bankassurance, internet, call-centers, utility
  lines prviders and concessionaries such as
  electricity and gas and phone
• Ombudsman Rule
• Financial Education Program
• 2004 - Decree 5,172 - lowered the IOF (Financial
  Transactions Tax) for life insurance from 7 to
  2, reaching 0 in 2006

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Life Products Characteristics

• Main target banks clients with monthly income
  under 3 min wages
• Basic Coverage death by any cause
• Additional Coverage funeral, cesta básica or
  typical family food basket, drugstore coverage.
• Lowest Premiums R 6 (US 3) / Coverage R
  3,000 (US1,500)

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Automobile Products Characteristics

• Vehicles from 10 to 20 years-old
• More strict acceptance criteria
• Few additional coverages compared to traditional
  products
• Higher deductible for partial indemnity
• Lower Premiums compare to traditional plans

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Other Lines Characteristics

• Fire and other non-life coverages (Multiple
  Peril)
• There are no specific rules on MI
• No data segregation in the reports sent by the
  insurer to SUSEP.
• The same product may be used for all kinds of
  consumers
• Distribution channels differentiate the target
  public

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Farm Family Life Insurance

• Farm Family Life Insurance - jointly designed by
  Bank of Brazil and MDA (2004), for family farmers
  associated to the National Agriculture
  Strengthening Program for Family Farmers (PRONAF)
  on agricultural funding operations (mandatory
  enrollment)
• Coverage Death and Extra Indemnity
• Distribution Channel BBs agencies
• Capital Limit R 600,00 to R 40.000,00
• Premium R 2,80/year for R600,00 Death and R
  600,00Extra Indemnity

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Distribution Channels

• In Brazil it is not mandatory to have a broker
  intermediation when commercializing an insurance
  product. The brokerage fee is mandatory.
• Social and professional associations and labour
  unions,
• Utility lines providers and concessionaires of
  public services, such as electricity and gas and
  phone
• Call-centers and internet
• The retail banks are the main distribution
  channels more than 90 of Life MI products
  through bankassurance, including ATMs

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Main Results

• Life Insurance good performance inspired other
  lines (Automobile, Fire,)
• The biggest retail banks commercialize MI life
  products
• The biggest life insurers are domestic and part
  of big national conglomerates, including big
  retail bank

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Main Results

• SUSEPs rules stimulated discussions on MI and
  sensitized the industry the theme was unknown
  before 2004
• Insurers preferred to design their own products,
  focus on low-income people
• Industry discovered low-income segment
• The poor are insurable

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Main Conclusions

• Products did not change so much. The
  commercialization focus changed
• Importance of the dialogue with industry for
  developing a new sector
• Tax relief has positive effects on MI lines seen
  that reduces insurance costs
• Flexibility for distribution channels
  fundamental role in the consumer market growth

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Main Conclusions

• Ombudsman Rule important mechanisms to safeguard
  the consumers rights, especially of the less
  fortunate ones
• Financial Education should be encourage, leading
  to a conscious consumer
• Brazilian market has few informal schemes when
  compared to other countries, facilitating
  supervision

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SUSEPs Challenges

• Segregate MI statistical data creating no
  additional onus for insurers
• Maintain an adequate regulatory environment,
  balancing promotional aspects X prudential
  requirements
• Raise the perception level of other stakeholders

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SUSEPs Challenges

• Engage in dialogue with other Brazilian
  supervisors and policymakers for convergence,
• i.e.
• Cooperation exchange
• Tax relief for other lines (Receita Federal)
• Encourage new lines, focus on rural lines (MDA)
• Promote financial education for low-income people
  (Ministry of Education)

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• Thank you
• Obrigada
• Regina L. G. Simões
• codin_at_susep.gov.br