The total exclusivity requirement imposed by the National Institute of Insurance on agencies who sell their insurance, is an anticompetitive mechanism that is making it difficult for the market to open up.
In his blog " Mercado Seguro " in Elfinancierocr.com, attorney and insurance specialist Said Breedy analyzes the criteria issued by the Commission to Promote Competition (COPROCOM) on the exclusivity clause in agency contracts with the National Institute Insurance (INS) in place since 2007.
In Costa Rica private insurers have come into the market, primarily selling life and car insurance, with customers seeing lower rates.
Although the National Institute of Insurance (INS) remains the undisputed market leader, private insurers are gradually gaining ground, particularly in the areas of auto and life policies.
The INS, an agency which has been in existence for 84 years, still controls 97% of the auto insurance market and 94% of life policies. In the former, in which $200 million worth of business was done in 2011, only Mapfre Seguros has taken a toll on the quasi-monopoly of the INS, taking 3% of the market, according to data released by Nacion.com.
The Decline of the State Social Security Fund is forcing Costa Ricans to seek private health insurance.
Buying private health insurance could be an option for Costa Ricans in the face of deficiencies in the Social Security Fund (CCSS), a state health system that is ailing.
However, despite a growing demand for good quality health services, there are still few options for private health insurance, reports Insidecostarica.com.
Until the constitutional motion filed with the Sala IV is resolved, private insurers have decided not to participate in this market.
An appeal lodged in February 2011, affects the rules for the opening of the market issued by the Superintendent of Insurance (Sugese).
Nacion.com outlines in an article, "also under question is article III of the Law Regulating the Insurance Market (8653 Act), which authorized such privatization.
Three years since the privatisation of the insurance sector, the state agency (INS) remains the main entity in the market.
The market dominance of the National Insurance Institute (INS), with 94% of total premium income, is, in the opinion of the Association of Private Insurance (AAP), a result of the supervision exercised by the Superintendency of Insurance (Sugese).
In the newly privatised insurance market, companies are competing with the National Insurance Institute (INS in Spanish) to increase their portfolios.
Last June, according to the premium income figures, registered insurance lines and assets, INS was first, followed by Assa and Alico with its life and health insurance lines.
"Where Assa stands out is in general insurance, where in the first half of this year it accumulated almost $6.7 million in premiums paid, this amount was generated by 42 different products, especially those covering property damage", wrote Sergio Morales on Elfinancierocr.com.
As published in the Official Gazette, Law No. 8956 Regulating the Insurance Contract is applicable on policies taken out from today.
Among the new features of the new, approved by the Legislative Assembly on 2 June, are the updates of what is considered insurable interest, the minimum amount of fees, definition and general aspects of the premiums.
"With this new legislation, a classification of insurance type (damage, fire, transportation, liability, etc.) has been established and conditions defined for life insurance" writes Sergio Morales writes in his article in Elfinancierocr.com
Life and Accident insurance policies could become interesting niches for new entrants to the market.
Costa Rica's insurance market, which recently ceased to be a monopoly of the National Insurance Institute (INS), and became a free market where new companies have been encouraged to enter, is still in its infancy.
Only 21% of the population has a life insurance policy, and about half do not have coverage for cars, according to a study by El Financiero.
The Costa Rican Chamber of Commerce will sell ‘autoexpedibles’ (self-issuing) insurance policies from the National Insurance Institute (INS).
The Chamber, through the alliance, will offer these insurance policies, which do not require any special study to be conducted, said William Constela, CEO of the INS.
El Financierocr.com reported statements by the executive, "an alliance with the Chamber was decided on because of its accessibility to dealers and a large group of citizens working in the commercial sector, potential customers for these policies."
The British Insurance giant BUPA expects to start operations in late 2011 or early 2012.
The company plans an investment of $2 million for its initial operation in the country, and hopes to expand its activities, said Anthony Cabrelli, chairman of BUPA for Latin America and the Caribbean.
According to an article by Batres Alexis in Elperiodico.com.gt “Enrique Murillo, executive director of the Guatemalan Association of Insurance Institutions (Agis), believes that the entry of BUPA into the domestic market will be seen as direct competition. ‘It will provide healthy competition for the sector’ he said. "
Although competition in compulsory insurance opened up to private operators in January, the market still has only one supplier, the state run INS.
According to the Law Regulating the Insurance Market and CAFTA, from January 2011 the market has been open to competition for compulsory car insurance and occupational risk policies.
In the case of occupational risk policies, the Constitutional Court admitted an appeal of unconstitutionality, which has put a stop to licensing new products in this field, until sentencing is passed.
Three years after removal of the monopoly in Costa Rica, sales by private insurers are growing, although the state insurer, INS, still maintains more than 90% of market share.
Although the National Insurance Institute (INS) still retains most of the market, private insurers have gradually increased their presence.
Of eleven listed companies, seven reported sales in the first half of the year and most believe that conditions exist to continue increasing sales and consolidating their position in the market.
There are ever more alternatives for easy subscription insurance policies in the country.
The opening of the Costa Rican insurance market has not only increased the number of companies offering policies, it has also widened the range of products available to Costa Ricans.
One kind of insurance policy that has awakened a lot of local interest are the so-called "autoexpedible" products (literally "self-issued" - insurance that can be sold without a participating authorized insurance intermediary).
Insurance companies are fighting it on the streets and going door-to-door.
The insurance market was open to the competition by private operators back in 2009. This has led market players to become much more aggressive in the search for new clients and in the fight to keep old ones.
The various companies now competing in the market are in varied phase of existence: "...some have advantages over others, such is the case of the National Insurance Institute (INS). The market can be split in two phases: the organization of insurers and the open battle for customers", reported Elfinancierocr.com.