MicroinsuranceinBrazil

Brazilian Population Outlook

Brazilian Insurance Market Overview

1,00% 2,53% 3,10% Insurance, Open Private Pension Funds and Capitalization Sectors Participation in the GDP 2,97% 2000

Market Overview MarketNumber Insurance Companies 115 Open Pension Funds 26 Capitalization Companies 18 Insurance Agents (Individuals) Insurance Agencies (Companies)

Market Premium Evolution ( millions R$)... 1,00% US$ 29,676 MM US$ 2,

MARKET GROWTH OPENING OF THE REINSURANCE MARKET PRODUCT DIVERSIFICATION THE MODERNIZATION OF THE REGULATORY AND SUPERVISORY PROCESS Brazilian Market Perspectives

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

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)

SUSEP’s First Actions  End of 2003 – internal discussions aiming at the design of simple and low-cost products  September/ Circular SUSEP 267/2004 – “popular” group life insurance product  November/ Circular SUSEP 306/ “popular” automobile product

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  Decree 5,172 - lowered the IOF (Financial Transactions’ Tax) for life insurance from 7% to 2%, reaching 0% in 2006

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)

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

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

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 Coverage: Death and Extra Indemnity Distribution Channel: BB’s agencies Distribution Channel: BB’s agencies Capital Limit: R$ 600,00 to R$ ,00 Capital Limit: R$ 600,00 to R$ ,00 Premium: R$ 2,80/year for R$600,00: Death and R$ 600,00:Extra Indemnity Premium: R$ 2,80/year for R$600,00: Death and R$ 600,00:Extra Indemnity

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

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

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”

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

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

SUSEP’s 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

SUSEP’s Challenges Engage in dialogue with other Brazilian supervisors and policymakersfor convergence, Engage in dialogue with other Brazilian supervisors and policymakers for convergence, i.e.: 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)

Thank you Obrigada Regina L. G. Simões