Breakdown of Premium in Insurance Policies

Point 26.1.6 of the General Regulation of Insurance Activity ( the “RGAA” after its acronym in Spanish) establishes the concepts and components that insurance companies must take into consideration when working out their fees, how the premium is constituted, and how it must be shown in the policy front.

The amendment introduced by Resolution 2018-1005-APN-SSN#MHA (the “Resolution”) refers to the breakdown of the different elements within the insurance premium that companies must perform in the policy front. The new wording of the second paragraph of point 26.1.6 of the RGAA reads: “In the policy front the gross premium must be shown disaggregated from the other components of the premium”.

Consequently, with the exception of individual life and retirement insurance contracts for which point 26.1.6 specially establishes that the net premium must be differentiated from the other components, from the amendment introduced by the Resolution the policy front must disaggregate (i) the gross premium, this being the net premium added to administration and acquisition expenses, without detailing these technical components separately and (ii) the other components of the premium, such as taxes, financing charges or other sorts of charges.

Before its amendment, the second paragraph of point 26.1.6 stated: “The entirety of the components of the premium must be shown disaggregated in the policy front”. With that wording, certain doubts had been raised on whether administration and acquisition expenses should be shown or not as concepts separately from the net premium in the policy front.