Tailor-made policies come to Brazil

A big development in Brazil’s commercial insurance market has been the implementation of a rule, in 2021, that gives buyers and underwriters the freedom to negotiate the wordings of their policies.

This change has created a great expectation among risk managers, as Brazil was for a long time a market famous for the rigidity of their wordings.

However, the market is taking its time to adapt to the new regulatory environment and buyers are yet to fully benefit from it, said participants in the Latin American chapter of the Global Risk Frontiers survey.

They also believe that both insurers and brokers need to up their games and introduce new products and services in Brazil.

“We are now witnessing a strong movement among insurers to adapt themselves to having more freedom to negotiate wordings with clients. It enhances the role played by the risk manager,” said Leonardo de Castro Beto, a director and vice-president at ABGR, Brazil’s risk management association.

“The trend now is for us to look for tailor-made contracts that meet the needs of each business segment. They are not very common yet, but the movement is there. It should still take a few years for it to happen more frequently.”

He added: “This process creates a huge demand on insurers. Previously there was a single contract for a risk, and from now on contracts will be personalised for each client. Buyers will insist on having what they want from insurers. It took ten years for the Consumer Code to take hold in Brazil, and it should take at least five years for the insurance market to offer tailor-made policies to all its clients.”

Beto, who is also the risk manager at energy company Energisa, is optimistic that this new freedom will motivate underwriters to take to Brazil products that already work well abroad.

“We see abroad some structured products that we do not see in Brazil. The freedom to negotiate wordings will bring this to the table from now on,” he said.

But Thiago Amorim, the head of procurement and risk manager at tech firm iFood and secretary general at ABGR, said that brokers need to up their game for this to happen.

“The big brokers could drink of the source of their international businesses and bring new solutions to Brazil. Several of the problems that we face in our daily operations have been solved abroad,” he said. “For example, the risk of our delivery workers having personal accidents. We have 350,000 delivery workers, and when I first asked insurers about this risk, they closed the door on my face. But later on, I have learned that covers for this risk were already available in Asia, in London and in Germany.”

“So I went abroad to learn how it worked, and then I came back to Brazil and explained the product to our insurers. They then started offering us the cover. This interchange of ideas is still missing, as the insurance market was closed in Brazil for so long,” he said.

Haroldo Alves Araújo, risks and insurance analyst at power company Cemig and chairman of the board at ABGR, noted that corporate insurance buyers sometimes prefer the juridical peace brought by a standard contract that has been pre-approved by regulators. But he said that the time has come to do a better job assessing how valuable a policy is for companies. Once that is done, it is possible to demand covers that more closely meet the needs of their companies from insurers.

“The Brazilian market still lacks tailor-made insurance covers. Sometimes the covers we need are not offered as standard products sold by the market, which often have restrictions and make it hard for clients to buy some policies,” he said.

Mellina Senra, a coordinator at ABGR’s electricity sector committee, stresses that a fast-evolving risk environment has increased the importance of being able to negotiate wordings with underwriters.

“The world has been through several unprecedented events this century. We have had to learn about them, and so has the insurance market. Insurers have had to design new products, to go beyond the off-the-shelf products that have always been available in Brazil,” she said.

“Today we have the option to ask for non-standardised wordings for operational risks. We can to some extent design the covers we want, including special and particular clauses. Insurers are now open to designing non-standard solutions,” she explained.

“Of course, exclusions and denials of coverage still exist. But we can evaluate the reasons behind those exclusions and denials of coverage and talk about how to improve the covers. I am not going to be a pessimist and say that the market does not support us. But as everything else in life, it is in a constant state of evolution,” concluded Senra.