On January 04, 2023, Law No. 21.521 was published in Chile with the aim of encouraging the provision of financial services through technological means by the providers governed by it.
Among the matters addressed by this regulation, it is interesting to note that it incorporates – as a novelty in our legal system – the regulation of (i) parametric insurance and (ii) inclusive insurance or microinsurance and mass insurance.
The relevance of the parametric insurance is that they escape from the traditional understanding of the insurance contract, which is essentially characterised as a contract of indemnity and therefore requires the existence of material damage and/or loss of profits in order for it to operate.
Indeed, in accordance with article 11 of DFL 251 on insurance companies, corporations and stock exchanges, as amended by the Fintech Law, allows insurance to be agreed as “parametric”, i.e., that “upon the occurrence of the risk or damaging event contemplated in the contract, the indemnity is paid without the insured having to justify the existence or amount of the damage, and even if the damage does not occur.”, being sufficient “that the insured is really exposed to suffer damage before the occurrence of the loss, even if such damage does not materialise”.
This modality -as we have said- appears to be alien to the traditional conception of the damage insurance contract in which the insured -in the event of a loss- in order to access the agreed compensation, must face a process of settlement of the loss and prove not only the damage caused by the loss but also the amount of the damage experienced.
According to the regulations that have been incorporated by the Law we are commenting on, the parametric insurance allows the insured to access the payment of the agreed compensation, independently of the damage caused by the event for which the insurance was contracted, being sufficient to prove the existence of the event foreseen in the policy (usually natural phenomena) and the fulfilment of the pre-established index in the respective contract.
Likewise, consequential losses are accepted without physical damage to properties and there is no adjustment process, being sufficient – according to the Chilean standard – that the variables and risks are demonstrable and clearly measurable through objective procedures and the risk is insurable according to the general rules.
In our country, considering the diversity of events or natural phenomena (earthquakes, frosts, droughts, etc.), parametric insurance will surely, depending on the complementary regulations to be issued by the regulator (Financial Market Commission), be not only an innovative solution but also a very useful one in the forestry, port and agricultural sectors, since, by complying with the parameters established in the contract, it provides liquidity in the event of the probability of the occurrence of a particular event.
Along with the above, the Law incorporated the regulation of inclusive insurance, microinsurance and mass insurance, understood as those aimed at (i) excluded or underserved sectors of the market regardless of their level of economic income; (ii) low-income sectors of the population; and (iii) susceptible of being distributed by mass marketing means, respectively.
In the case of parametric insurance, the regulatory body “The Financial Market Commission” shall determine, by means of a general rule, the criteria to which, among others, the variables that may be taken as indexes, the risks that may be insured under this modality and the characteristics of the policies to be deposited shall be subject, excluding social security insurance, those that are compulsory and those that are required as a requisite for the development of a specific activity.
In addition to the above, the Commission shall determine, by means of a general regulation, the rules applicable to insurance companies and auxiliaries to the insurance trade with respect to the marketing, distribution, expeditious settlement of claims and claims handling relating to inclusive insurance, microinsurance and mass insurance.
Consequently, given this first step, we will have to wait for this regulation to verify whether the objectives behind this legislation, which is fundamentally aimed at facilitating the provision of services by digital means, are met, incorporating technological neutrality with respect to the channels that can be used, which should facilitate the offer of insurance at lower costs and greater accessibility.
ALEJANDRO ACUÑA M.
LUIS CIFUENTES ARAYA
WHITNEY SILVA S.
Av. Américo Vespucio Sur 80, Piso 2, Las Condes, Santiago, Chile.