Property Insurance in Costa Rica
The Law of Monopolies of the Instituto Nacional de Seguros (National Insurance Institute), was passed in 1924, and it stated that insurance was to be handled as a state monopoly. This is still the case for insurance, telecommunications and the socialized medical system. For people not used to state monopolies, this must sound awful, and it must immediately conjure up images of mounds of red tape and of government officials who spend their time filing their nails or at eternal coffee breaks. Even though reality does include some of these depressing pictures, it also offers various benefits and a recent improvement in efficiency.
The INS is a financially solid institution, which is not likely to go bankrupt in the event of a natural catastrophe such as earthquakes or floods. Itís a large institution, with 2500 employees and a Board of Directors that oversees its functions. Since itís a monopoly, only the INS and its agents are allowed to sell and handle insurance in Costa Rica. This law has sanctioned various ďentrepreneursĒ who have tried selling foreign or private insurance.
The premiums vary from one kind of policy to the other; for example, car insurance is high, while home fire or theft insurance is low (when compared to other countries). The cheaper policies are subsidized by other types of insurance, a fact that can be considered an advantage of the monopoly over private insurance. However, even this great benefit doesnít seem to make up for the slow bureaucratic system and the lack of service-oriented workers. Unenthusiastic workers is a reason why people in Costa Rica prefer to have an insurance agent, who is often more concerned about providing excellent service to his/her customers.
There are some components of Costa Rican insurance policies that everyone should be familiar with. First of all, there is the inflationary clause. Due to constant inflation, the INS applies an automatic increase in the amount insured; some policies, like the ones for home fire, have an optional inflationary clause. Secondly, there are grace periods which allow a late payment and a renewal of the policy. Policies that are paid yearly have a grace period of 30 days, while those paid twice a year have a 15 day period, and so forth. When the client doesnít pay after the grace period, the policy will expire. The reinstatement of a policy is a complicated affair, which includes the obligatory visit of an agent who will assess what is being insured once again. The suspension of a policy is not possible in Costa Rica; in some countries people ask for a temporary suspension, when they feel that they wonít need the policy for a certain amount of time. Last but not least, in order to cancel a policy, one must write the INS, include the policy number, and ask for a reimbursement; there are some restrictions that apply that make it better for people to transfer their policy to another person, instead of canceling it.
The main types of policies are offered in Costa Rica, even if they arenít as varied or competitive as in other countries. The social interest policies are directly between the INS and the client, and they are usually much cheaper than in other countries. These policies are the following: obligatory auto insurance, home fire and home theft insurance. Workerís compensation is also an obligatory insurance which covers work related accidents during the job or while travelling to or from the workplace. The last social interest policy is crop insurance, which obviously helps farmers whose crops have been ruined by natural disasters.
Among the ďcommercialĒ policies are the following: auto, fire, theft, liability, medical, life, general accident, student accident, travellerís, electric equipment, and named peril insurance. The latter can best be defined as a policy that is used to cover something that canít be covered through other types of insurance. This policy covers the following events: fire & lightning, earthquakes, cyclones & hurricanes, floods, robbery, mutinies & insurrection, vandalism and explosions.
So, as you can see, even though the INS is a state monopoly, it covers just about every type of possible situation that calls for a policy. There has been a lot of talk about the privatization or disintegration of this state monopoly, which is the result of the neo-liberal tendency that the Costa Rican government has been embracing recently. Only time will tell if the INS continues to maintain a solitary rule over all insurance in Costa Rica.