Credit Life Insurance - Insurance Agents

1. Credit Life Insurance

Credit life insurance was regulated primarily by Resolution 35678 of the Argentine Superintendence of Insurance ("SSN") on March 22, 2011. It allowed insurers to pay the policyholder of such insurance products (typically banks taking out these group policies to cover customers requesting financing) management fees within a maximum established by Resolution 35678 (see "Group Credit-Life Insurance Regime" in our Insurance News No. 2, April 5, 2011).

More recently, through Communications "A" 5795 and 5828, the Central Bank of Argentina introduced a prohibition for financial institutions to collect any remuneration or profit, directly or indirectly from insurance companies, for insurance coverages that customers purchase and that are ancillary to a financial service, regardless of whether they are requested by the customers or they are a condition set by the financial institutions. This meant, among other things, that financial institutions could no longer collect the management fees provided for in SSN Resolution 35678 for group credit life insurance. This also resulted in  the prohibition for financial institutions to collect commissions or make a profit for property insurance covering damage to motor vehicles or real estate serving as guarantee for pledge or mortgage loans.

Communications "A" 5795 and 5828 have now been supplemented by Resolution SSN 39628, which establishes that both insurers and intermediaries cannot grant compensation in any way, whether directly or indirectly, to creditors, policyholders and/or beneficiaries of group credit life insurance. Most usually it is banks that meet these three positions in financings secured by a group credit life insurance, but the prohibition also extends to any creditor, policyholder and/or beneficiary of any group credit life insurance even if it is not a financial institution.

SSN Resolution 39628 also imposed the obligation upon insurers to take the necessary steps to verify and monitor that insureds only be charged with the premium set by insurers. Insurers also have the obligation of publishing these rates on their websites or other means.

SSN Resolution 39628 set limits on the cost of acquisition (intermediation) and administration of these policies. These limits must be set individually and in the aggregate may not exceed 30% of the premium. Additionally, the limit for intermediation costs cannot exceed 15%. SSN Resolution 39628 further clarifies that although insurers can market these insurance through a broker or agent, these cannot be entities related to the creditor, policyholder or beneficiary or the insurer.

2. Insurance Agents

SSN Resolution No. 39628 also introduced changes to the insurance agents regime established by SSN Resolution 38052 (see "Insurance Agents: New Legal Framework" in our Insurance News No. 16 of December 27, 2013), banning agents from making the purchase of an insurance cover a condition for granting goods or services provided by the agent. A similar prohibition existed until now for insurance agents, although they were allowed to require that customers buy insurance protection to cover the insurable interest of the insurance agent when financing the sale of a good or service.

3. Entry into force of SSN Resolution 39628

A specific date has not been set for the entry into force of SSN Resolution 39628, so it will take effect after the eighth day of its official publication (article 5 of the Argentine Civil and Commercial Code). As of the date of publication of this article, SSN Resolution 39628 has not yet been officially published.

Any new policy written or renewed after the entry into force of SSN Resolution 39628 must meet these new regulatory requirements. Policies that are to be renewed after the entry into force of the Resolution must be adjusted by January 31, 2016. Insurers must amend their technical plans in line with the Resolution and report such amendments to the SSN.