On July 2, 2021, the National Council of Private Insurance (CNSP) published CNSP Resolution No. 409/2021, which establishes new principles and characteristics for the operation of microinsurance, repealing CNSP Resolution No. 244/2011.
Insurance developed and structured for the low-income population, individual micro-entrepreneurs and, as an innovation introduced by the new Resolution, micro and/or small businesses are classified as microinsurance.
Resolution No. 409/2021 provides a list of basic principles and values that will govern these products, namely:
- Inclusion: the products must promote the inclusion of the target audience (low-income population, individual micro-entrepreneurs, micro-enterprises and small businesses);
- Simplicity: the contract and procedures related to microinsurance should be easy for policyholders to understand;
- Focus on the client: coverage must meet the real needs of the target audience;
- Accessibility: product distribution, information and costs must be appropriate and compatible with the target audience;
- Transparency: information related to the product must be provided in a clear, objective, timely and appropriate manner;
- Proportionality: the supervised entities’ controls must be managed considering the covered risks and the insured amount of the contracts;
- Sustainability: products must be developed with the objective of providing sustainable social development;
- Financial education: insurance companies must strive to promote the training of their employees and the financial education of their customers, to enable a full understanding of the microinsurance offered; and
- Innovation: insurance companies must consider, in the development and distribution of products, the adoption of new processes, technologies, methodologies and procedures to meet the needs of consumers.
The new Resolution also establishes that microinsurance plans may cover, individually or together, both damage and personal coverages, provided that (i) they are structured in the financial sharing regime; (ii) have easy-to-understand clauses; (iii) clearly identify the covered and excluded risks, as well as the obligations of the parties; (iv) avoid the excessive adoption of coverage exclusions; and (v) provide timely deadlines for the regulation and settlement of claims, taking into account the needs of the target audience.
Finally, article 6 of the Resolution provides that SUSEP may issue regulations and adopt the measures it deems necessary to implement the provisions established therein. Despite this, we note that the content of the published Resolution is in line with the more principle-based stance that has been adopted by CNSP and SUSEP, allowing insurers to have more freedom in structuring their products.
Resolution No. 409/2021 will enter into force on August 2, 2021.
Demarest’s Insurance and Reinsurance team continues to monitor news related to the topic and is available to provide any additional clarifications that may be necessary.