On August 9, 2021, the Superintendence of Private Insurance (SUSEP) published Circular No. 639, which provides for news rules and criteria for the operation of the auto insurance line.
The new Circular is in in line with the new regulatory framework of Damage Insurance introduced by SUSEP Circular 639/2021, aiming at simplifying the operation of auto insurance in order to increase inclusion and access to the product and promote the development of the market.
Thus, in order to allow more flexibility for the product and to provide greater contractual freedom between the parties, the main changes resulting from the new Circular are related to the structuring of auto insurance coverage, as follows:
- Possibility of hull coverage that covers, individually or in combination, different risks to which the insured vehicle is subject, whereby the Insurer assumes only part of the risk, according to criteria established in the contractual conditions;
- Freedom to offer hull coverages with the referenced market value and/or with the establishment of another objective and transparent criterion for specifying the maximum indemnity limit (limite máximo de indenização – “LMI”) at the time of the accident;
- Express provision that the contract type that considers the referenced value of the vehicle must guarantee the indemnity in accordance with the listed value of the vehicle on the date of the occurrence of the accident;
- Possibility for auto insurance to be contracted to offer direct guarantee to the Insured, without being linked to a specific vehicle, in which case the criteria for such vehicle’s identification must be established in the contractual conditions;
- Flexibility in the scope of personal passenger accident coverage (APP) that is not linked to a specific vehicle, but rather to the Insured, as a vehicle driver.
Furthermore, the Rule expressly provides that the contractual conditions must establish the criteria for full compensation, prohibiting the deduction of amounts referent to previous damage to the vehicle in these cases.
Regarding the repair of damaged vehicles, the Circular establishes the possibility of structuring a product that can provide for repairs carried out in an auto repair shop that is part of the Insurer’s network of providers and/or, in a combined manner, the free choice of providers by the Insured.
At this point, it is important to note that the Rule also establishes the possibility of using used parts in the repair of insured vehicles, respecting the applicable regulations.
Finally, in order to phase out restrictions imposed by specific auto insurance regulations, the new Circular will repeal SUSEP Circulars No. 269/2004, 389/2009 and 557/2017, as well as SUSEP/DEFIS/GAB Circular Letter No. 02/2004 and SUSEP Letter No. 1/2019.
SUSEP Circular No. 639/2021 will come into force on September 1, 2021 and, for those policies that are not in compliance with the new provisions, it provides for a period of 180 days for adaptation, as of the date the new Circular comes into force.
Demarest’s Insurance and Reinsurance team is available to provide any additional clarification that may be necessary and to assist you in adapting existing damage insurance products.