Analysis
30 Sep 17

Brazil's automobile insurance rates, coverages

Although data from Brazil's private insurance regulator Susep shows that the automobile industry accounts for approximately 60% of the country's insurance market, only about 27% of the cars in the country are actually protected. Review some of the insurance rates and coverage options below.

Insurance Rates

Like most places around the world, insurance rates are determined by the profile of the vehicle and the driver, as well as the location where the car is being kept.

Rates are higher for sports cars and for those which have vehicle accessories such as alloy wheels, fog lights, and others as they attract thieves and carjackers. Brazilian cars run on gasoline, diesel, ethanol, and natural gas but the type of energy used has no direct affect on rates.

Basically, the more likely your car will be stolen, the higher the insurance. Most Brazilians are more worried about their car getting stolen than getting in an accident.

However, this does not necessarily mean that expensive cars have higher insurance rates per se. Insuring the Volkswagen Gol, one of Brazil's least expensive cars, is quite expensive relative to the value of the car due to the value of its parts on the black market.

Other factors which influence price is where the vehicle is being kept. Is it parked in a garage, on the street, at home, work, or at school? Garaged cars are obviously safer.

The zip code registered for the car - locally known as the CEP - also reflects price but this is more due to the profile of the drivers in the area than the crime in the area.

Driver characteristics which affect rates are age, sex, driving experience, the number of kilometers driven every month, and the number of people to use the vehicle, and car accident history.

Types of Policies

Comprehensive Insurance: protects the vehicle against fire, theft, collisions and other risks, with partial or total coverage, and it normally includes third party protection. It is usually more costly than other options, with the premium increasing with older vehicles.

Basic Insurance: provides protection against theft. Some insurers offer this coverage with the installation of a vehicle tracking system in exchange for offering more coverage such as total lost protection in the case of a collision. Customers are only compensated if the car is stolen and not found or if damage equivalent to more than 75% of the value of the car occurs. 

Popular Insurance: was introduced at the end of 2016 to help cash-strapped drivers cope with the economic crisis. It involves partial collision coverage of which vehicle pairs can be made with refurbished parts. This is offered by companies such as Azul and Tokio Marine.

To reduce rates, some drivers also look for modular insurance, simplifying their protection even further by opting for no 24-hour assistance or only being covered in the case of theft.

Third Party Insurance: covers material, bodily and moral damage to third parties. This could include assets such as cars, walls, and poles and other people, to include pedestrians as well as drivers.

Passenger Accident Insurance: in used in case of an accidental death or permanent disability of passengers within the vehicle. This coverage is very important for those who give rides to people and required for those who work as a taxi and Uber driver.

DPVAT Insurance: is a state mandated insurance which benefits victims of traffic accidents. It is paid annually along with the IPVA personal vehicle property tax.

Tracker Supported Insurance: offers low-cost car theft insurance along with the installation of a car tracking device. This usually means that 100% of the value of the car - as defined in Brazil's Fipe vehicle pricing table - is reimbursed in the case of a theft or carjacking.

Besides a tracker installation fee of some 300 reais, premiums start at around 70 reais/m and can run up to 120 reais/m in the city of São Paulo. Generally, this insurance is offered for cars no more than 20 years old and for those which are valued at no more than 60,000 reais.

This type of insurance is usually the cheapest option for a driver with a high risk profile, meaning a young driver with an old car that lives in an area with many car thefts and uses the car a lot.

In the wake of Brazil's 2015-16 economic crisis, many of the local insurance companies have been offering this service, including its largest, Porto Seguro, which decided to enter this segment in the second semester of 2016.

Equipment manufacturers have also positioned themselves in the market by forming partnerships with insurance companies. One is local vehicle tracking and monitoring company Ituran which has teamed up with Liberty Cardiff, Mapfre and QBE.

Fleet Insurance

There are basically two types of automobile fleet insurance in Brazil, being Affinity Groups and Collective Policies.

For Affinity Groups, the insurance can be contracted by the employer or an incorporated association working exclusively for the employees of a company. As such, other types of associations such as unions and cooperatives are not eligible. 

The premium is usually paid directly by the employees. The policy, however, could include vehicles owned by the employer.

As for Collective Policies, which are simply known as fleet insurance, it covers vehicles of the same owner, whether it be a company or an individual. Third parties providing services exclusively for the insured could also fall under the policy umbrella.

When the insurance is contracted by a company, the policy could provide coverage for cars owned by directors from headquarters, subsidiaries or legally recognized affiliates.

Finally, the insured is also permitted to include new vehicles which were purchased, rented or leased, upon payment of the corresponding premium.

Authored by: Daniel Bland