Brazil's private insurance regulator scrapped a requirement for auto insurers in a bid to cut insurance policy prices by 10% and ultimately discourage the use of informal insurance services, Valor Econômico reported.
The superintendency Susep authorized companies to use generic auto parts instead of brand originals in claim events, a decision it expects will produce significant savings on repair budgets and that will eventually be reflected in the premiums.
Susep's overarching goal is to put industry products on a level playing field with so-called vehicle protection providers, a cheaper and informal type of insurance that does not fully comply with regulatory requirements, especially in periods of increased claims when insurers' reserves are put to the test.
"We hope that insurers will now tap a share of the informal market," Rafael Scherre, a director with the regulator, was quoted as saying.
Insurers will be asked to specify in their policy agreement which type of auto part might be applied under different claim events, with the insured having the last word on eventually securing original parts by paying for a higher policy.
"The product needs to get cheaper," Scherre reportedly said. The use of recycled parts by vehicular protection insurers has given them a considerable edge against traditional insurers, as original parts can double the price of generic auto parts.
At the time of this writing, a bill that intends to bring vehicle protection under Susep oversight is reportedly being discussed in the lower house of the Brazilian Congress.
