Ricardo Pires de Souza, a tattooed boxer-turned-insurance salesman, says the first trick to selling life insurance in Santa Marta, a Rio de Janeiro slum reclaimed from drug gangs by military police, is not to wear a suit.
“People would never trust you and it’s too hot anyway,” he says, climbing through the alleys of the slum, or favela, where he was born.
The second trick, he says, is finding a way to explain insurance to people who have barely just opened their first bank account – a previously inaccessible section of Brazil’s consumers that the world’s biggest insurers are now scrambling to reach.
“I remember one guy who didn’t see the point of life insurance,” Mr. de Souza recalls. “I told him: imagine you die and your wife is left with nothing. What if she meets another man who beats her and your kids? She’s going to stay with him because she has no choice – is that what you want?”
Mr. de Souza is one of Brazil’s first brokers to be trained under a national micro-insurance pilot program, Estou Seguro, backed by companies including Switzerland’s Zurich Financial Services and Tokio Marine of Japan.
After ditching his full-time job as a Thai boxing teacher, Mr. de Souza now sells life and funeral policies that cost as little as 10 reais ($5.50 U.S.) a month for an entire family or, as he likes to put it, “protection” for the price of a couple of bottles of Coca-Cola.
While micro-insurance is growing fast in other emerging markets from India to Kenya, Brazil is becoming a particularly attractive target as rising income among the poor promises to lift 60 per cent of the population into the middle class by 2018.
Government initiatives to pacify some of Brazil’s most dangerous favelas before the country hosts the World Cup in 2014 and the Olympics two years later are opening the doors to millions more potential customers.
Meanwhile, micro-insurance regulation, which has been in discussion for four years but is expected to be finalized before July, is also set to boost the industry.
“It’s still small but we are very optimistic about the micro-insurance segment,” says Luciano Bezas, a director at Tokio Marine’s Brazil office.
By 2020, Brazil’s insurance market is expected to be worth 300-billion reais and contribute 7.5 per cent of the country’s gross domestic product, of which 40 per cent will come from micro-insurance, according to Eugenio Velasques, president of Brazil’s Micro-insurance Commission and an insurance director at Banco Bradesco.
At Tokio Marine, micro-insurance already accounts for about 12 per cent of Brazil premiums and is expected to grow at a rate of about 20 per cent this year, Mr. Bezas said.
Globally, Accenture estimates there are about 2.3 billion potential micro-insurance customers. But only 5 per cent of them have taken out policies, according to Lloyd’s of London.
In Brazil, insurance is still very much a novelty as hyperinflation and constant currency crises in the 1980s and early 1990s closed down the market for decades and left little culture of long-term planning.
“For low-income families, insurance appears to be something excessive that is not within their reach and is only associated with bad things,” says Mr. Velasques.
Aside from persuading people about the value of insurance, another big challenge for micro-insurers is distribution.
Bradesco has managed to gain a quarter of the segment by opening small bank branches in favelas, while others have turned to utility services and retailers to access customers.
In its joint venture with Banco do Brasil, Spanish insurer Mapfre sells policies through the low-cost electronics chain Casas Bahia, while QBE and ACE tag their accounts on to people’s telephone and electricity bills, sometimes luring customers with free lottery tickets.
However, new regulation to complement a blanket micro-insurance resolution passed last December could make it easier to operate in the sector.
Luciano Santanna, superintendent of insurance regulator SUSEP, said the new rules could allow micro-insurers to set up with as little as a fifth of the capital normally required. The regulation is also expected to set maximum premiums and could be followed by fiscal incentives.
But in Rio, where about one in five people live in favelas, the fate of the micro-insurance industry largely depends on whether the government perseveres with the city’s “pacification” once the Olympics are over in 2016.
If not, residents would most likely return to the most traditional forms of insurance: the church and drug traffickers, says Santa Marta’s Mr. de Souza.
“In the past, the traffickers would pay funeral costs and everything for anyone who was really in need – well, anyone who had the courage to ask, that is.”