Microinsurance in Brazil

1. Microinsurance in Brazil

2. Brazilian Population Outlook

7. BrazilianInsurance Market Overview

8. Insurance, Open Private Pension Funds and Capitalization SectorsParticipation in the GDP 3,10% 2,97% 2,53% 1,00% 2006 1995 2000 1994

9. Market Overview

10. Market Premium Evolution • (millions R$) 64.607 56.927 52.308 32.758 28.259 16.331 10.035 1995 1994 1995 2004 2005 2006 2000 1999 ... ... 1,00% US$ 29,676 MM -2006 ... US$ 2,1771

11. PRODUCT DIVERSIFICATION THE MODERNIZATION OF THE REGULATORY AND SUPERVISORY PROCESS MARKETGROWTH OPENING OF THE REINSURANCE MARKET- 2007 . Brazilian Market Perspectives

12. Microinsurance or “Seguro Popular”in Brazil: Included in the Brazilian Government policy for micro-finances

13. 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)

14. SUSEP’s 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

15. 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

16. 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 (US$1,500)

17. 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

18. 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

19. 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: BB’s agencies • Capital Limit: R$ 600,00 to R$ 40.000,00 • Premium: R$ 2,80/year for R$600,00: Death and R$ 600,00:Extra Indemnity

20. 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 ATM’s

21. 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

22. Main Results • SUSEP’s 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”

23. 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

24. 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

25. SUSEP’s Challenges • Segregate MI statistical data creating no additional onus for insurers • Maintain an adequate regulatory environment, balancing: promotional aspects Xprudential requirements • Raise the perception level of other stakeholders

26. SUSEP’s Challenges Engage in dialogue with other Brazilian supervisors and policymakersfor 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)

27. Thank you Obrigada Regina L. G. Simões codin@susep.gov.br