Current status of the insurance market - October 2010

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In 2007 Costa Rica ratified CAFTA, which opened the local market to insurance companies besides the INS.  Now in October of 2010, what is the situation?  Has competition evolved and are consumers enjoying new benefits, or purchasing insurance from new companies?  The following article gives details of the market, how SUGESE is regulating it and sales figures for companies participating in the market.

The director of the SUGESE (Superintendent) Javier Cascante, gave a speech at a workshop for the press on the insurance market in Costa Rica that Fijatevos.com attended.  He outlined four broad areas of reference for his agency, which have guided its actions to this point.

• Authorizing new products
• Regulating the sector
• Define the Regulatory Model
• Diffuse information

In general, the regulatory framework follows a European and Asian model more closely than the US model. One key question for Costa Rica is how tightly the market is controlled, and does the regulatory agency have any means of enforcing it's positions.  Currently, companies which wish to operate here must establish their competence and commitment to the local market.  The procedure for receiving a license to insure is rigorous, and the company must establish that it has sufficient working capital to provide for the level of risks they wish to insure.

Superintendent Cascante emphasized his belief that the opening of the insurance markets to competition is good.  The consumer has a right to be informed, file complaints and to be able to see what is going on.  The media is an important part of this process. The superintendent, then gave a presentation regarding the number of companies participating in the market in 2009 and 2010, plus some projections as far as growth for 2011.

The statistics show that while there has been some growth, the sector has not grown as much as many expected.  SUGESE expects that it will grow more explosively in the very near future.   As of August 31st 2010, there are 9 insurers authorized in Costa Rica, either fully active or authorized to begin activity.

In Costa Rica there is a distinction between the insurer, which is the company that offers and covers the policy, and agencies.  The insurer may sell the policy directly, or through an agency – either exclusive or not.  The insurance agent who works for an exclusive agency, may only sell policies from one insurer.   Insurance agents who sell policies from multiple companies are called brokers, and must meet requirements imposed by SUGESE.

However, the INS still dominates the market through 2010.  (See separate chart for figures)

Policies and Competition in the Market
At the end of August 2010, there were 197 policies available in the market, of these 154 were offered by the INS, 28 by ASSA, and twelve by the teacher's union, which is now selling insurance to the public in general. The other companies participating in the market are so far not competing directly amongst themselves, with MAPFRE offering auto insurance, and ALICO offering personal insurance. Even ASSA offers a variety of insurance more geared toward businesses, including liability insurance, maritime vessels and transport of goods; and these policies do not compete with any policy offered by the other two newcomers. 

However all of the new companies have policies under evaluation by SUGESE and in 2011 the level of competition should increase. Pan American Life Insurance de Costa Rica is authorized by SUGESE, but does not have any approved policies as yet, another 4 insurers are in the process of receiving authorization - Quálitas Compañía de Seguros (Costa Rica) , Seguros Bolívar Aseguradora Mixta ,  Aseguradora del Istmo ADISA  and Best Meridian Insurance Company  (as branch only) .

Supervision of the market

The SUGESE has identified 13 supervisory actitivities that it will carry out, divided into 3 groups: Normative Controls, Inspections, and Monitoring of Requirements.  See the related articles for details of its activities:

Origin of the SUGESE Regulatory Agency for Insurance in Costa Rica

SUGESE Framework and Supervision of Insurance Market

Through August 31st the SUGESE has handled 92 complaints.  They are of varying types: declining to go to arbitration, failure to reply to complaints, applications or requests not attended to in the required time frame, failure to supply copy of general policy conditions or copy of contract to the insured, and glitches in supplemental services derived from different coverages.

Illicit Providers ?

A gray market does not physically exist in Costa Rica.  If someone opens an office and begins selling policies, the SUGESE can take action to shut them down quickly. The basis would be complaints by authorized companies, or consumers who have purchased insurance from the company.  A company must be authorized to operate in Costa Rica, then each policy that they wish to sell must be approved.  Also the agents that may sell insurance for authorized companies must have passed training and requirements that the company established with SUGESE.

However, there have been complaints about companies selling on the Internet coverages for Costa Rica. This is outside the field of action for SUGESE and is difficult to control in any case.  Consumers must be educated about what constitutes insurance and what companies are authorized to operate here.  Policies purchased on the Internet from companies not licensed to operate here are questionable. The buyer must be certain that the coverage is good here, and that the company is regulated in their home country.