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Increase in default leverages demand for credit life insurance

According to CNseg data, demand for credit life insurance reached BRL 4.2 billion in the first three months of 2023

EXCLUSIVE – According to information from the National Confederation of Commerce in Goods, Services and Tourism, defaults among Brazilians reached the highest historical level ever recorded: 77.9% of the population has some restriction in the name. The last survey by Serasa showed that, until April, 71.4 million people were indebted.

In addition, a Deep Center survey showed that the chance of Brazilians recovering a debt or overdue installment within 30 days of maturity is almost 68%. However, this probability drops to less than 5% in debt over six months. Data such as these demonstrate the importance of credit life insurance, a product that aims to help at times when the insured is experiencing financial difficulties.

The credit life insurance covers the settlement of debts with financial institutions, in the event of death or disability of the insured person, personal and payroll loans, installments from consortiums, credit card debts and those relating to student loans, in addition to overdraft coverage or outstanding balances in credit cards and financing of goods or other commitments involving financial credit, according to the conditions established in the contract. The payment of the policy by the final consumer can be made monthly or in cash.

With the increase in defaults, more Brazilians are seeking the product. According to data from CNseg (National Confederation of Insurance Companies), demand for credit life insurance reached BRL 4.2 billion in the first three months of the year, 16.1% compared to the same period of 2022. “People have realized that insurance credit life can help protect the achievements that each one has, thus contributing to individual and family financial planning, issues that Brazilian society still needs to advance”, says Luís Reis, executive director of Partnerships at Zurich.

According to the executive, in the first three months of the year, the company grew by 9.4% in portfolio premiums, when compared to the first quarter of 2022. Reis says that, due to the particularities of credit life insurance, generally linked to loans and cards , the insurer chooses to distribute the product through various partnerships. “We have just signed a partnership with OMNI1, a joint venture between Grupo Wiz Co and Grupo Omni, for the distribution of credit life insurance and other products”.

At Brasilseg, there was an 82.4% growth in credit life insurance premiums issued in the first quarter of 2023, compared to the same period in 2022. For Hugo Ofugi, superintendent of Life products at the company, the expansion of the product was driven by the higher volume of sales and reduction of cancellations, having as main factor a greater awareness of the importance of insurance. “Any sustainable market growth must be based on the perception of value that the customer has for the product. For this, players should focus on offering credit life insurance in a transparent way and with coverage that really makes sense to those who buy it”.

According to Ofugi, it is possible that there is indeed a growth in the demand for insurance in the context of economic expansion, especially considering that the credit base tends to follow this growth. However, the executive reinforces that credit life insurance will not necessarily be used to access credit, except in those operations that require guarantees. “Despite this, I believe that credit life insurance has a promising future in the Brazilian market, considering the possible economic recovery of the country, the current low penetration of the sector and the fact that it is a relatively simple product to be understood in relation to others that are sold separately”.

Nicole Fraga
Policy Review

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