Brazilian Private Insurance Authority issues new regulations for personal lines insurance

The Brazilian Private Insurance Authority (Susep) published Susep Circular No. 667/2022 and CNSP Resolution No. 439/2022 on July 4, 2022, both of which regard new rules on risk coverage for personal lines insurance. The new regulations are almost the same as the respective draft versions submitted to public consultations held on November 10, 2021 (Susep Public Consultation Notices No. 41/2021 and No. 42/2021).

These new regulations were issued as part of Susep’s 2021 and 2022 Regulation Plans, and are in line with the Brazilian economic policy guidelines provided for in Decree No. 10,139/2019 (which requires regulatory bodies, such as Susep, to simplify, clarify and consolidate all regulation under their purview).

The regulatory changes were motivated (as highlighted by the Statement of Reasons) by market research findings showing there is room to expand risk coverage operations for personal lines insurance in Brazil. The research also revealed there is space for new players to join the Brazilian industry, which would foster competition and the development of innovative products. As such, the rationale behind the new regulations can be surmised as:

• Simplifying personal lines insurance regulation without detriment to existing consumer rights and protections;
• Implementing a more systematic and less fragmented approach to the rules;
• Fostering greater contractual freedom and flexibility;
• Creating a more competitive, dynamic, transparent and innovative industry environment that is capable of expanding the base of insureds and meeting consumer expectations.

The new regulation also consolidates more than fifteen previously existing regulations into two regulations. Besides other types of risk coverage, the new resolution features general provisions covering life insurance for security guards (previously provided for in CNSP Resolution No. 5/1984) and loan protection insurance (previously provided for in CNSP Resolution No. 365/2018). Susep’s new circular also covers specific provisions on burial, loan protection, education, and travel insurance (previously provided for in CNSP Resolution No. 315/2014).

The main changes introduced by the new regulations concern the following topics:

Greater contractual freedom

• New regulations have removed or changed (where applicable) certain provisions that restricted contractual freedom:
  • A broader definition of ‘personal accident’ now allows insurers alone to define related coverage exclusions (Article 2, item I of CNSP Resolution No. 439/2022 and Article 17, sole paragraph of Susep Circular No. 667/2022);
  • Greater freedom to define grace periods has been granted to insurers – except in cases of suicide or suicide attempts, situations in which the grace period remains fixed at two years (Article 12 of CNSP Resolution No. 439/2022 and Article 32 of Susep Circular No. 677/2022);
• Insurers may now combine the coverage from different insurance lines, such as with a similar provision recently adopted for retail P&C insurance and large risks insurance (Article 19 of Susep Circular No. 667/2022);
• It is possible to structure more flexible and diverse products for hospitalization insurance coverage (Article 73 of Susep Circular No. 667/2022).

Services as payment for indemnity

• In general, the new resolution allows for contractually establishing the provision of a service (as well as any other method) as a form of indemnity, which was only permitted if the insured party expressly requested it (Article 16 of CNSP Resolution No. 439/2022);
• A specific rule provides that insureds or dependents up to fourteen years of age can only contract insurance that provides indemnification via reimbursements or services, as long as the expense or service is directly related to the covered claim (Article 6 of CNSP Resolution No. 439/2022);
  • In this case, it is possible to structure insurance products covering services that are of interest to the insured parties or dependents, such as life insurance that covers inventory or educational assistance.

Refusing to provide insurance to people with disabilities

• Insurers are now forbidden to deny the issuance of insurance coverage based solely on an insured’s pre-existing disability – the new regulation considers this a form of discrimination that is subject to administrative prosecution (Article 7 of CNSP Resolution No. 439/2022).

New developments regarding the reversal of provision

• The financial resources from the Mathematical Provision for Benefits to be Granted (PMBaC, in Portuguese) must be returned to beneficiaries if the insured party dies during the grace period (Article 15 of CNSP Resolution No. 439/2022);
• In regard to contributory insurance plans structured under the capitalization framework, insurers are now obliged to provide the sums originating from the premium paid by the insured (irrespective of any grace period) if the insured has no longer any relation with the policyholder, or in the event that the group insurance is terminated (Article 24 of CNSP Resolution No. 439/2022).

Full loan protection insurance and insurance for people with global equity

• It is no longer obligatory to fill out an adhesion insurance proposal and issue an individual certificate for full business loan protection insurance and global equity insurance (Article 26, paragraph 6, and Article 33, paragraph 2 of CNSP Resolution No. 439/2022). As these are forms of group insurance, the policyholder’s role in communicating claims and reporting when members join or leave the insured group is vital.

Regulation of group personal accident insurance

• Group personal accident insurance for guaranteeing risks arising from concerts, fairs, exhibitions and other similar types of events is now regulated, provided that:
  • The insurance in question is non-contributory;
  • It is impossible to determine the identity of the individuals exposed to risk prior to the incident; and
  • The coverage is restricted to risks while the insured individuals are present at an organized event and/or a pre-determined area described in the insurance policy. This new product removes the need to submit an adhesion proposal and send the individual certificate to insureds (Article 27 of CNSP Resolution No. 439/2022).

Life insurance for security guards

• Insurance limits concerning life insurance for security guards previously provided for (which dated back to the 1980s) have been eliminated. These limits will now be defined in the terms of the group insurance policy for each professional category (Article 30 of CNSP Resolution No. 439/2022).

Adjusted wording for rules concerning pre-existing diseases

• Provisions concerning the exclusion of pre-existing diseases must be included in contractual conditions (Article 27, main paragraph of Susep Circular No. 667/2022);
• It is prohibited to exclude pre-existing diseases if the insurance company does not require the insured party to fill out a personal health statement (Article 27, paragraph 2 of Susep Circular No. 667/2022);
• The parties may agree to exclude coverage for specific pre-existing diseases declared in the personal health statement related to the insurance proposal (Article 27, paragraph 3 of Susep Circular No. 667/2022).

Acts resulting from mental insanity, alcohol abuse or use of toxic substances

• Insurers cannot deny coverage to acts the insured party carried out due to mental insanity, alcohol abuse or use of toxic substances, in line with the regulatory understanding of Susep/Detec Circular No. 8/2007 (Article 26 of Susep Circular No. 667/2022).

CNSP Resolution No. 439/2022 and Susep Circular No. 667/2022 will take effect on August 1, 2022, and all personal insurance products developed and filed with Susep as of this date must comply with their provisions. Moreover, insurers must adapt all personal insurance products registered before this date to the new rules within 270 days (as per Article 37 of CNSP Resolution No. 439/2022 and Article 91 of Susep Circular No. 667/2022).

Mattos Filho has prepared an analysis (available in Portuguese) of the main provisions that should be considered when adapting insurance products to the new regulations.

For further information on the rules Susep and the CNSP have amended, please contact Mattos Filho’s Insurance, Reinsurance & Private Pensions practice area.