MicroinsuranceMicroinsurance

inin

BrazilBrazil

Brazilian Brazilian Population Population

OutlookOutlook

Population: 184,388,620

52%

48%

Economically Active Population: 96,031,971Population not classified as EAP: 88,356,649

Source: IBGE - National Household Sample Survey 2005

Income Distribution

1.023.622

51.573.651

38.243.804

29.669.537

11.165.917

10.463.858

6.828.965

2.583.108

without income

up to 1

1 to 2

2 to 3

3 to 5

5 to 10

10 to 20

Over 20

Nu

mb

er o

f Min

imu

m W

ages

Fonte: IBGE - National Household Sample Survey 2005

Employed Population - Grouped by Category

53%

10%

37%

Formal Employees: 28,793,152

Militaries and Public Servants: 5,490,792

Others / Informal Employees: 20.360.043

Source: IBGE - National Household Sample Survey 2005

Urban Concentration

38.849.338

28.923.782

9.994.660

19.297.623

5.729.286

99.327.856

0 to 14 years-old

15 to 49 years-old

50 years-old ormore

Ag

e

Urban Rural

Source: IBGE - National Household Sample Survey 2005

BrazilianBrazilianInsurance Market Insurance Market

OverviewOverview

1,00%

2,53%

3,10%

1994 1995 2006

Insurance, Open Private Pension Funds and Capitalization Sectors

Participation in the GDP

2,97%2,97%

2000

Market Overview

MarketMarket NumberNumber

Insurance CompaniesInsurance Companies 115115

Open Pension FundsOpen Pension Funds 2626

Capitalization CompaniesCapitalization Companies 1818

Insurance Agents (Individuals) Insurance Agents (Individuals) 39.51839.518

Insurance Agencies (Companies)Insurance Agencies (Companies) 22.13122.131

Market Premium Evolution(millions R$)

...

1,00%1994

1995 32.75832.758 52.30852.308 56.92756.927 64.60764.607

20052000...1995 20061999 2004

28.25928.25916.33116.331

10.03510.035

US$ 29,676 MM - 2006

US$ 29,676 MM - 2006

US$ 2,1771US$ 2,1771

...

MARKET GROWTH

OPENING OF THE REINSURANCE MARKET-

2007

.

PRODUCT DIVERSIFICATIONTHE MODERNIZATION OF THE REGULATORY AND SUPERVISORY

PROCESS

Brazilian Market Perspectives

Microinsurance or Microinsurance or “Seguro Popular”“Seguro Popular”

in Brazil:in Brazil:Included in theIncluded in the

Brazilian Government policyBrazilian Government policyfor micro-financesfor micro-finances

Government Policy Government Policy for Microinsurancefor Microinsurance

General Insurance: products for General Insurance: products for the the low-income peoplelow-income people and for the and for the formal and informal “micro-formal and informal “micro-entrepeneurs” entrepeneurs” (SUSEP)(SUSEP)

Rural Area: products to protect Rural Area: products to protect “low-income family farmers”“low-income family farmers” (MDA – Ministry of Agrarian (MDA – Ministry of Agrarian Development)Development)

SUSEP’s First ActionsSUSEP’s First Actions

End of 2003End of 2003 – internal discussions – internal discussions aiming at the design of simple and aiming at the design of simple and low-cost productslow-cost products

September/2004September/2004 - Circular SUSEP - Circular SUSEP 267/2004 – 267/2004 – “popular” group life “popular” group life insurance productinsurance product

November/2006November/2006 - Circular SUSEP - Circular SUSEP 306/2006 - 306/2006 - “popular” automobile “popular” automobile productproduct

Parallel IncentivesParallel Incentives Alternative distribution channelsAlternative distribution channels: :

“bankassurance”, internet, call-“bankassurance”, internet, call-centers, utility lines prviders and centers, utility lines prviders and concessionaries such as concessionaries such as electricity and gas and phoneelectricity and gas and phone

Ombudsman RuleOmbudsman Rule Financial Education ProgramFinancial Education Program 2004 - 2004 - Decree 5,172Decree 5,172 - lowered the - lowered the

IOF (Financial Transactions’ Tax) IOF (Financial Transactions’ Tax) for life insurance from 7% to 2%, for life insurance from 7% to 2%, reaching 0% in 2006reaching 0% in 2006

Life Products Life Products CharacteristicsCharacteristics

Main target: banks’ clients withMain target: banks’ clients with monthly income under monthly income under 3 min 3 min wageswages

Basic Coverage: Basic Coverage: death by any cause death by any cause Additional Coverage: Additional Coverage: funeral, funeral,

“cesta básica” or “typical family “cesta básica” or “typical family food basket”, drugstore coverage.food basket”, drugstore coverage.

Lowest Premiums: R$ 6 (US$ 3) / Lowest Premiums: R$ 6 (US$ 3) / Coverage: ≤ R$ 3,000 (US$1,500)Coverage: ≤ R$ 3,000 (US$1,500)

Automobile Products Automobile Products CharacteristicsCharacteristics

Vehicles from Vehicles from 10 to 20 years-old10 to 20 years-old More strict acceptance criteriaMore strict acceptance criteria Few additional coveragesFew additional coverages compared compared

to traditional productsto traditional products Higher deductibleHigher deductible for partial for partial

indemnityindemnity Lower PremiumsLower Premiums compare to compare to

traditional planstraditional plans

Other Lines Other Lines CharacteristicsCharacteristics

Fire and other non-life coverages Fire and other non-life coverages (Multiple Peril)(Multiple Peril)

There are no specific rules on MIThere are no specific rules on MI No data segregation in the reports No data segregation in the reports

sent by the insurer to SUSEP.sent by the insurer to SUSEP. The same product may be used for The same product may be used for

all kinds of consumersall kinds of consumers Distribution channels differentiate Distribution channels differentiate

the target publicthe target public

Farm Family Life Farm Family Life InsuranceInsurance

Farm Family Life InsuranceFarm Family Life Insurance - jointly - jointly designed by Bank of Brazil and MDA designed by Bank of Brazil and MDA (2004), for family farmers associated to (2004), for family farmers associated to the National Agriculture Strengthening the National Agriculture Strengthening Program for Family Farmers (PRONAF) Program for Family Farmers (PRONAF) on agricultural funding operations on agricultural funding operations (mandatory enrollment)(mandatory enrollment)

Coverage: Death and Extra IndemnityCoverage: Death and Extra Indemnity Distribution Channel: BB’s agenciesDistribution Channel: BB’s agencies Capital Limit: R$ 600,00 to R$ 40.000,00 Capital Limit: R$ 600,00 to R$ 40.000,00 Premium: R$ 2,80/year for R$600,00: Premium: R$ 2,80/year for R$600,00:

Death and R$ 600,00:Extra IndemnityDeath and R$ 600,00:Extra Indemnity

Distribution ChannelsDistribution Channels

In Brazil it is not mandatory to have a broker In Brazil it is not mandatory to have a broker intermediation when commercializing an intermediation when commercializing an insurance product. The brokerage fee is insurance product. The brokerage fee is mandatory.mandatory.

Social and professional associations and Social and professional associations and labour unions, …labour unions, …

Utility lines providers and concessionaires of Utility lines providers and concessionaires of public services, such as electricity and gas public services, such as electricity and gas and phoneand phone

Call-centers and internetCall-centers and internet The retail banks are the main distribution The retail banks are the main distribution

channels: channels: more than 90% of Life MI products more than 90% of Life MI products through bankassurancethrough bankassurance, including ATM’s, including ATM’s

Main ResultsMain Results

Life Insurance good performance Life Insurance good performance inspired other lines (Automobile, inspired other lines (Automobile, Fire,)Fire,)

The biggest retail banks The biggest retail banks commercialize MI life productscommercialize MI life products

The biggest life insurers are domestic The biggest life insurers are domestic and part of big national and part of big national conglomerates, including big retail conglomerates, including big retail bank bank

Main ResultsMain Results

SUSEP’s rules stimulated SUSEP’s rules stimulated discussions on MI and sensitized the discussions on MI and sensitized the industry – the theme was unknown industry – the theme was unknown before 2004before 2004

Insurers preferred to design their Insurers preferred to design their own products, own products, focus on low-income focus on low-income peoplepeople

Industry discovered low-income Industry discovered low-income segment:segment:

““The poor are insurable”The poor are insurable”

Main ConclusionsMain Conclusions

Products did not change so much. Products did not change so much. The commercialization focus changedThe commercialization focus changed

Importance of the Importance of the dialogue with dialogue with industryindustry for developing a new sector for developing a new sector

Tax reliefTax relief has positive effects on MI has positive effects on MI lines seen that reduces insurance lines seen that reduces insurance costscosts

Flexibility for distribution channelsFlexibility for distribution channels – – fundamental role in the consumer fundamental role in the consumer market growthmarket growth

Main ConclusionsMain Conclusions

Ombudsman RuleOmbudsman Rule: important : important mechanisms to safeguard the mechanisms to safeguard the consumers rights, especially of the consumers rights, especially of the less fortunate onesless fortunate ones

Financial EducationFinancial Education should be should be encourage, leading to a conscious encourage, leading to a conscious consumerconsumer

Brazilian market has Brazilian market has few informal few informal schemesschemes when compared to other when compared to other countries, facilitating supervisioncountries, facilitating supervision

SUSEP’s ChallengesSUSEP’s Challenges

Segregate MI statistical data Segregate MI statistical data creating creating no additional onusno additional onus for insurers for insurers

Maintain an adequate regulatory Maintain an adequate regulatory environment, balancing: environment, balancing: promotional promotional aspects aspects XX prudential requirementsprudential requirements

Raise the perception level of Raise the perception level of other other stakeholdersstakeholders

SUSEP’s ChallengesSUSEP’s ChallengesEngage in dialogue with other Engage in dialogue with other Brazilian supervisors and policymakersBrazilian supervisors and policymakers for convergence,for convergence,

i.e.:i.e.: Cooperation exchangeCooperation exchange Tax reliefTax relief for other lines (Receita for other lines (Receita

Federal)Federal) Encourage new lines, focus on Encourage new lines, focus on rural rural

lineslines (MDA) (MDA) Promote financial education for low-Promote financial education for low-

income people income people (Ministry of Education)(Ministry of Education)

Thank youThank youObrigadaObrigada

Regina L. G. SimõesRegina L. G. Simõescodin@susep.gov.brcodin@susep.gov.br