Brazil turns to 'sandbox' model to boost insurance competition

Brazilian insurance regulator Susep is taking action to make it easier for new companies to enter the insurance market. 

On Tuesday, Susep launched a public consultation process that will result in the creation of a regulatory sandbox.

The move comes as Brazil has seen the number of insurtechs grow and the government of business-friendly President Jair Bolsonaro seeking to revive the sluggish economy through increased competition. 

The public consultation will run until October 30 and the resulting regulation is set to be implemented in January 2020. 

“We're talking about companies that come up with new proposals for underwriting and risk retention. The goal is to expand insurance coverage in the country by reducing the prices of products for consumers, stimulating competition and innovation through a different experience”, said Susep director Eduardo Fraga.

The focus of the sandbox will be on mass-market products, which excludes the life, pension, reinsurance, corporate risks and civil liability segments. 

Susep will initially evaluate the first 10 product and service proposals that come out of the public consultation process. After a proposal is approved, Susep will grant a time-limited authorization of up to 36 months to help the new companies enter the market under rules that are less strict.

The Brazilian insurance industry is dominated by companies that are owned by the country's largest banks and the government is betting that insurtechs and fintechs will gradually help reduce today's high market concentration in the insurance and banking sector.

In 2018-2019, the government and the central bank have implemented several regulatory changes to support the creation of fintechs and ease their entry into the banking industry.