President Oscar Arias yesterday signed into law a bill opening the country´s 84-year insurance monopoly to private competition.
The new law established guidelines for the regulation of the insurance industry, strengthens the state-owned National Insurance Institute (INS) with the intent of giving it the flexibility to compete with private insurance companies, among other issues.
“As soon as this law is published, the insurance market will be open to competition according to the will of Costa Ricans, legislators and this government,” Arias said. “We have been very clear in saying that certain protections tied us to a past that was very good, but that nonetheless was the past. If INS is to exist and survive, if it is to be stronger and more efficient each day, it must have the tools to do so. This is precisely what this law does.”
Guillermo Constenla, president of INS, said the institution is prepared to compete. “We believe we have the ability to survive and lead in an open market,” Constenla said.
Constela said INS is undergoing an institutional transformation aimed at improving its services and better tailoring them to customers´ needs.
Accomplishing this will be no small feat. A recent CID-Gallup poll financed by INS found that just 55 percent of Costa Ricans were satisfied with INS services.
As part of Costa Rica´s Central American Free-Trade Agreement with the United States (CAFTA) commitments, legislators on July 1 passed in second and definitive debate a bill ending the insurance monopoly.
However, before private companies can set up shop in the country, the government must establish an independent agency to regulate the insurance market, along the lines of the country´s regulatory agencies for financial institutions, securities and pensions.
The National Council for Financial System Supervision (CONASSIF), the Central Bank agency charged with regulating the financial system, will have up to a year and a half to establish what will tentatively be called the Superintendency of Insurance. In the meantime, one of the existing regulatory agencies, most likely the Superintendency of Pension Funds (SUPEN), will regulate the insurance industry, according to Wilberth Quesada, SUPEN´s communications director.
For a detailed analysis of what the opening of the insurance monopoly will mean for policy holders and Costa Rica as a whole, read Friday´s Tico Times print edition.