JPRF-S-2024-0106 — Microinsurance Standard Establishing a Regulatory Framework to Promote Insurance Services for Low-Income Populations

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-S-2024-0106 FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public laws applied by competent authorities; That, Article 84 of the Fundamental Norm mandates that every body with normative authority shall be obliged to adapt, formally and materially, the laws and other legal norms to the rights provided therein; That, Article 226 of the Magna Carta provides that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law, having the duty to coordinate necessary actions for the effective fulfillment of the rights recognized in the Constitution; That, Article 227 of the Supreme Norm establishes that Public Administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation; That, Article 303 ibidem determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Function; That, Article 308 ut supra, among other aspects, stipulates that financial activities are a public order service; That, Article 13 of the Organic Monetary and Financial Code, Book I, creates the Financial Policy and Regulation Board, part of the Executive Function, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health services policy and regulation; That, Article 14 ibidem, in numbers 1 and 4, provides that it falls within the scope of its competencies to the Financial Policy and Regulation Board, among others, to formulate financial and insurance policy; as well as the formulation of policies and issuance of regulations that foster financial inclusion in the country, in coordination with public and private sector entities related to this scope; being authorized to issue norms in matters within its competence; That, numbers 1, 9, 10, 11, 14 letter b., 15 letters c. and d., 17, 25 and 27 of Article 14.1 of said Code, Book I, stipulate that it corresponds to the Financial Policy and Regulation Board, among other faculties, the following: i) regulate the creation, constitution, organization, activities, operation and liquidation of financial and insurance entities; ii) issue the non-prudential regulatory framework to which financial and insurance entities must adhere; iii) promote financial inclusion processes and the full exercise of financial users' rights; iv) establish the system to define charges for services provided by financial and insurance entities, and expenses with third parties derived from active operations in which users of these entities incur, promoting financial innovation and financial inclusion processes; v) authorize financial and insurance entities to carry out new activities or operations

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | that, without being prohibited, are necessary for the fulfillment of financial and insurance policy, in accordance with the regulations issued for this effect; vi) establish, within the framework of its competencies, any measure that helps foster financial inclusion, promoting the participation of financial and insurance entities; vii) issue the norms that regulate insurance and reinsurance; viii) apply the provisions of said Code and resolve cases not provided for therein, within its scope of competence; and, ix) exercise the other functions, duties and faculties assigned to it by the Organic Monetary and Financial Code and the law; That, Article 143 of the aforementioned norm defines financial activities as those operations and services related to financial flows and risks; that are carried out habitually by the entities that make up the insurance system, determining it as a public order activity, that is, they are regulated and controlled by the State; That, Article 147 ibidem points out that it is a State responsibility to guarantee access to financial activities and promote their democratization through the formulation of policies and regulations; thus, being obliged to protect the rights of users and clients of the national financial system; That, the Fiftieth Transitory Provision of the Organic Monetary and Financial Code, Book I, prescribes: “Transitional Regime of Resolutions of the Codification of the Monetary and Financial Policy Board Resolutions. The resolutions contained in the Codification of Monetary, Financial, Securities and Insurance Resolutions of the Monetary and Financial Policy Board and the norms issued by control bodies will remain in effect until the Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0017-M of February 10, 2024, sent to the President of the Board the Technical Report No. JPRF-CTSV-002-2024 of February 9, 2024, issued by the Technical Coordination of Policy and Regulation of the Securities and Insurance System; as well as the Legal Report No. JPRF-CJF-2024-007 of February 9, 2024, issued by the Legal Coordination of Policy and Financial Norms of this Board, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on February 16, 2024 and carried out through video conference on February 19, 2024, reviewed the Memorandum No. JPRF-ST-2024-0017-M of February 10, 2024, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-CTVS-002-2024 and Legal Report No. JPRF-CJF-2024-007, in addition to the corresponding draft resolution; That, the Acting Technical Secretary of the Financial Policy and Regulation Board, with Memorandum No. JPRF-ST-2024-0048-M of April 11, 2024, sends to the President of the Board the Technical-Legal Report No. JPRF-CTCJ-2024-004 of April 11, 2024, issued by the Technical Secretariat of this Board, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on April 11, 2024 and carried out through video conference on April 15, 2024, reviewed the Memorandum No. JPRF-ST-2024-0048-M of April 11, 2024, issued by the Acting Technical Secretary of the Board; as well as the aforementioned Technical-Legal Report No. JPRF-CTCJ-2024-004, in addition to the corresponding draft resolution;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, the Financial Policy and Regulation Board, in an ordinary session held in person and by technological means through video conference, convened on April 11, 2024 and carried out on April 15, 2024, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE ONE.- Incorporate the following chapter immediately after Chapter XVI “Standard for the Application of the First Paragraph of the Transitory Provision Thirtieth of the Organic Monetary and Financial Code”, Title II “On the Constitution, Organization, Activities and Functioning”, Book III “Private Insurance System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions: “CHAPTER XVII: MICROINSURANCE STANDARD SECTION I: OBJECT, SCOPE, DEFINITIONS AND PRINCIPLES Art. 1.- Object.- Establish a regulatory framework that promotes the supply of insurance services to the low-income population, financially protects the insured against the materialization of life and general risk events, safeguarding the financial sustainability and stability of the insurance sector. Art. 2.- Scope.- This standard shall apply to insurance companies, insurance producer advisors, and alternate distribution channels. Art. 3.- Definitions.- For the purposes of this standard, the following definitions shall apply:

1. Individual Insurance Certificate.- It is the document issued by the insurance company and delivered to each insured person of a group, collective, master, or similar insurance policy, which must contain minimum information of the policy to which it adheres for full knowledge, such as the branch or insurance denomination; names and domiciles of the insurance company, policyholder, insured; name and percentage of beneficiaries; policy and certificate number; precise identification of the person or thing with respect to which the insurance is contracted; validity of the policy or certificate with initiation and expiration dates and times; insured amount or method to determine it; premium or method to calculate it; date of document issuance; and, express acceptance of the contracting parties, when necessary; and, web access to the policy to which the insured adheres. In addition, it must contain the coverages and exclusions; the procedure and timeframes in which the insured and/or beneficiary must proceed in case of a claim; and, the necessary documents for the claim.
2. Non-bank Correspondents.- Are channels through which entities from the public and private financial sectors, under their sole responsibility, may, through third parties, promote, offer and commercialize microinsurance products, collect insured information, send documents for subscription to the insurance company, collect premiums, as well as inform the insured, receive and deliver documents related to the claims process to the corresponding entity; provided that, those third parties are connected to the financial entity through data transmission systems, previously authorized by the competent control body, identified and that comply with all internal control conditions, physical and information technology security.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 3. Solidarity Correspondents.- Are channels through which entities from the popular and solidarity financial sector, under their sole responsibility, may, through third parties, promote, offer and commercialize microinsurance products, collect insured information, send documents for subscription to the insurance company, collect premiums, as well as inform the insured, receive and deliver documents related to the claims process to the corresponding entity; provided that, those third parties are connected to the financial entity through data transmission systems, previously authorized by the competent control body, identified and that comply with all internal control conditions, physical and information technology security. 4. Microinsurance.- Affordable and simplified insurance product, designed by an insurance company to cover unmet financial protection needs for the low-income population with limited access to traditional financial services, against the materialization of adverse events provided for in the insurance policy in exchange for the payment of a premium. 5. Low-income population.- Is the target audience composed of persons whose monthly incomes are equal to or less than a unified basic salary and who are above the poverty line defined by the Ecuadorian Institute of Statistics and Censuses (INEC). Art. 4.- Principles.- Insurance companies, insurance producer advisors, alternate distribution channels, and virtual platforms operating in microinsurance shall be governed by the following principles: a) Inclusion.- The microinsurance product will be developed in an affordable and simplified manner, to promote access of the low-income population to the insurance system and financially protect them against the materialization of risk events. b) Simplicity.- The conditions, requirements and contractual procedures related to the microinsurance product will be simple and easy to understand for the insured and beneficiaries, from promotion to the fulfillment of all contract obligations. c) Customer focus.- The culture, logistics, processes, marketing and technology of the insurance company will align with the needs and particularities of the target audience of the microinsurance product. d) Accessibility.- The promotion, distribution, subscription, premium payment and settlement of microinsurance will be understandable, expeditious, adequate and available for its target audience. e) Transparency.- Information related to microinsurance will be provided in a clear, objective, timely and appropriate manner for its target audience. f) Sustainability.- The microinsurance product will seek to reduce the vulnerabilities of the low-income population, through adequate risk mitigation in pursuit of sustainable social development. g) Innovation.- In the development and distribution of the microinsurance product, insurance companies will consider the implementation of systems or structures capable of articulating processes, technologies, methodologies and procedures, in order to achieve efficiency and quality to satisfy consumer needs.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | h) Consumer protection.- Throughout the entire value chain of the microinsurance product, the consumer will be provided with truthful, sufficient, clear, complete and timely information about the offered services, so that they can make an adequate and reasonable choice, as well as a correct use of the product. SECTION II: ON THE PROMOTION, OFFERING, COMMERCIALIZATION AND SALE OF MICROINSURANCE Art. 5.- Promotion, offering, commercialization and sale.- The promotion, offering and commercialization of microinsurance may be carried out directly by insurance companies, insurance producer advisors, alternate distribution channels or virtual platforms for the promotion and commercialization of insurance. The sale of microinsurance will be carried out exclusively by insurance companies. Microinsurance coverage will be granted by an insurance company duly authorized by the Superintendency of Companies, Securities and Insurance as established in Article 9 of the Organic Monetary and Financial Code, Book III (General Insurance Law). Art. 6.- Contract with alternate distribution channels.- Contracts for distribution services between insurance companies and alternate distribution channels, in addition to what is cited in Article 8 of Chapter XII “Standards for the Promotion and Contracting of Insurance Policies and Prepaid Comprehensive Health Care Plans through Alternate Distribution Channels”, Title II “On the Constitution, Organization, Activities and Functioning”, Book III “Private Insurance System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions, must add the following clauses for the case of microinsurance: a) The obligation on the part of the insurance company to train the personnel of alternate distribution channels on topics related to the roles assigned to them, in the context of the microinsurance product operation; b) The obligation of the insurance company to provide alternate distribution channels with the physical or digital manual specified in Article 10 of this standard; and, c) The obligation of the alternate distribution channel to deliver to the insured, the physical or digital manuals referred to in letter b). Art. 7.- Lines of business.- The microinsurance product will cover the following lines: life, medical assistance, personal accidents, agricultural, home and commercial multi-risk, fire and allied lines, and others that, after prior analysis, are authorized by the Superintendency of Companies, Securities and Insurance. SECTION III: PRODUCTS, TECHNICAL NOTE, POLICIES AND CLAIMS Art. 8.- Technical note and premium rate.- For the authorization of premium rates and technical notes, insurance companies that commercialize microinsurance must comply with the requirements determined in Chapter X “Standards for the Structuring of Technical Notes that Support Premium Rates”, Title II “On the Constitution, Organization, Activities and Functioning”, Book III “Private Insurance System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Art. 9.- Policies.- For the microinsurance product, and in order to favor the supply, access and use of this product, the policies formalized physically or digitally for individual or group insurance will be issued subject to the conditions and data that policies must contain, as provided in Article 25 of the Organic Monetary and Financial Code, Book III (General Insurance Law) and Article 699 of the Commercial Code, considering the object of the standard and the definition of the microinsurance product, governed by the principles of inclusion, simplicity, accessibility and transparency, detailed in Article 4 of this Standard. In the case of issuance of group, collective, master or similar insurance policies, an individual insurance certificate will be delivered to each insured person, physically or digitally, which must contain minimum information of the policy to which they adhere. Prior inspections regarding insurable persons and assets shall not be established, unless the nature of the insurance so requires, with the consent of the policy or individual certificate depending on the case by the insured being sufficient for the microinsurance coverage to take effect. If such inspections are necessary, they must be consistent with the coverages granted in the microinsurance product. The limits and indemnification amounts must be clearly established in the policy conditions or individual insurance certificate, therefore, the participation of loss adjusters will be optional. Deductibles will not be applicable. Art. 10.- Instruction manual.- The insurance company must accompany the policy or individual insurance certificate with an instruction manual, physical or digital, drafted in a clear, precise, complete and pedagogical manner, which must contain at least the following information: a) Identification of the insurance company providing the service; b) Clear and concise explanation of the coverages provided by the microinsurance product; c) Summary of terms and conditions; d) Clear and concise explanation of the claims procedure, including the list of documents required for the payment of coverage claims; and, e) Clear and accessible contact information for customer service, comprising: phone numbers, addresses, email and business hours of the insurance company. The manual must reflect the content of the insurance policy. In case of non-compliance with the above, following due process, the Superintendency of Companies, Securities and Insurance will apply what is prescribed in Article 40 of the Organic Monetary and Financial Code, Book III “General Insurance Law”, without prejudice to any other sanction applicable for acts violating other provisions, which does not limit the application of civil or criminal sanctions that correspond, in accordance with the law.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Art. 11.- Payment and claims management.- Upon the occurrence of the claim, the claim request and its formalization, will be presented to the insurance company, the insurance producer advisor or the alternate distribution channels. The insurance company will accept or deny its decision in writing with motivation within the timeframe established in Article 42 of the Organic Monetary and Financial Code, Book III (General Insurance Law). The insurer must proceed with payment within the timeframe established by law, payment which will be made physically or digitally through the national financial system. In case of insurance reimbursement, this will be carried out via electronic funds transfer or any other electronic payment method, in accordance with Article 25 of the Organic Monetary and Financial Code, Book III (General Insurance Law). GENERAL PROVISIONS FIRST.- Insurance companies will apply the simplified due diligence procedures established in Article 18 “Due Diligence Processes” of Section IV “Elements of the Anti-Money Laundering, Terrorist Financing and Other Crimes Risk Management Prevention System (SPARLAFTD)”, Chapter III “Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing and Other Crimes Prevention”, Title III “On the Surveillance, Control and Information of the Private Insurance System”, Book III “Private Insurance System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions. SECOND.- The Superintendency of Companies, Securities and Insurance shall determine...