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The Brazilian insurance market: its modernization

The National Insurance System is in a strong transition process with the direct and indirect participation of all its representatives. This process has as its objective the modernization of the system or what each sector believes to be ‘modernization’.

For some, the necessary inclusion of our System in the International System and consequent adaptation to the evident globalism of the insurance industry; for others, the traditional complacent posture of maintaining the ‘status quo’; and still others, ultra-conservative, intend the return of the reinsurance monopoly and absolute state control of the System.

It seems to me that the initiatives to introduce this process begin with the breaking of the monopoly maintained by the IRB: a few market leaders – brokers, some insurers and technicians from the IRB itself, experts in the international and global condition of insurance – tried to update the methodology of the processes in our System.

Unfortunately, they were barred by the abundant ignorance that permeated Government decisions, in the structure of SUSEP, and in the representations of insurers and brokers who, at the time, believed that the breaking of the reinsurance monopoly and the authorization for the creation of Brazilian reinsurers – highly protected – would already be enough modernization for our market. They did not take into account the main and traditionally forgotten point: the major interests of the customers.

For years, the ideal of modernizing the market was maintained through articles, courses, lectures, techno-commercial and political pressures. However, with the arrival of the new SUSEP Superintendent, Mrs. Solange Paiva Vieira, a greater interest emerged. And everything leads us to believe that, undeniably, the renowned economist and trusted person of the Minister of Economy, follows the primer of frank neoliberalism where State intervention as a participant in the evolution and modernization of the economy is allowed. In this sense, it contradicts the laissez faire of liberalism, the survival of the fittest of old Darwin and the Wild Capitalism of the Americans of the past.

I have great sympathy for neoliberalism, however, in the case of the activities now under study and others practiced by SUSEP, I believe that there must be a certain distance, except for better judgment, between the position of the Superintendent who seeks to modernize our archaic System and the other structures of SUSEP that still persist in acting in the 1967 style. As in the case of Resolution 382 of 2020, which seems to indicate a certain lack of knowledge regarding the activities of insurance brokers. On the other hand, several agendas under study with the purpose of allowing the market to take on the free creation of its products, eliminating the systematic standardization of clauses and conditions, demonstrate a clear objective to modernize the System.

Except for a better judgment, it seems to me that no one bother to find out what most participants in the current Insurance System want. How to participate in the international market to which you are dependent and participant. Above all, to answer the real customer demand to what, in fact, would be the modernization of the market.

Therefore, it is essential that everyone gets involved and listens, comments and advises on SUSEP studies  to achieve a long-term objective, a proposal for the proper, efficient and effective functioning of a new Insurance System in Brazil. One that does not embrace the  traditional subservience of the weakest to the strongest, an important point of neoliberalism. It is also worth remembering that the economic / financial development of the insurance market depends heavily on the country’s own economic evolution and, as a consequence, on the adoption of measures that will allow the generation of demand for insurance. With the outbreak of the pandemic, we were already in a serious economic situation. We were expecting for numerous reforms after the Social Security reform. Now, the recession is even stronger and, certainly, its effects will be felt by the System. Thus, it is important to understand that the simple modernization will not necessarily influence the growth of insurance production, nor will the System come to adopt only actions that, under the pretext of competition and cost reduction, intend modernizing measures, professionally false and out of touch with reality, very common in many  projects and programs in Brazil.

As mentioned in the beginning of this article, the ideas to modernize the National Insurance System are quite heterogeneous, with numerous and different thoughts in the  intended form for its maintenance and, above all, in the way of acting in the Insurance activity. The important thing to consider preliminarily is that the insurance activity is important and reasonable, involving millions of jobs and different dependencies. Therefore, the attempt to modify the System in an exemplary way is extremely serious. By the way, it is good to remember that the technical insurance reserve in Brazil reaches a value above 1 trillion reais. This is still quite small considering the international market.

 

So, within my inference, what do we really want for a new Insurance System?

Of the countless versions, I dare to present what I think each of the participants could recommend: really, it is a great audacity, because I should humbly retire to my insignificance. But, come on!

In the context of ultraconservatives, it seems to me that most of them would like to go back to 1967 with the System imposed by Decree Law 63, including maintaining the IRB as a monopoly body. In this group, we will find a reasonable number of insurers, mainly among those that better control their representative institutions. Also, a reasonable number of insurance brokers linked to their representative bodies.

The conservatives, in my opinion, wish to maintain the current situation, the ‘status quo’, with greater control by SUSEP in order to standardize as much as possible conditions and clauses, to further restrict the activities of insurance brokers with restrict supervision, preferably under their total control. Here we find bank insurers and other interests.

The liberals, on the other hand, want the total insertion of the local market to the international market, bringing to Brazil all product operations, immediately modernizing the services inherent to this activity. Financial institutions, banks, investment companies and such would be excluded and forbidden to operating in insurance. In my opinion, it would put the insurance and reinsurance activities entirely at the mercy of the international market and, here in Brazil, influenced by savage capitalism,  would detonate the weakest. For example, we would have to consider if it is of interest to  Brazil to maintain reinsurance companies. Would the IRB be kept holding more than 60% of the national reinsurance, as a Brazilian reinsurer, aloof from the shareholding control of the banks?

Finally, we have the neoliberals of the booklet od Ms. Solange Vieira that, in my opinion, intends to open the market by liberating the productive operation of insurers, creating the conditions for technical improvement of insurance brokers, but balancing the pressures of the strongest, allowing the maintenance of local insurers and reinsurers, but fully inserted in the international market.

And, after all, what does the customer want?

I dare to consider that the Brazilian client, or the client operating in Brazil, wants his risks to find technical conditions and efficient and effective services from his brokers and the insurance market that allow him to control the choice of his retention and insurance transfer policy. And in this process, a fair and careful regulation of claims and, above all, the return of the institution of ‘good faith’ from a distant past, which today is called professional ethics.

Paulo Leão de Moura Jr. – São Paulo, July 2020

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