Identifier
Created
Classification
Origin
06SANJOSE2802
2006-12-21 21:49:00
UNCLASSIFIED
Embassy San Jose
Cable title:  

COSTA RICA'S INSURANCE MONOPOLY PREPARES FOR COMPETITION

Tags:  ETRD EINV ECIN PGOV CS 
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VZCZCXYZ0000
RR RUEHWEB

DE RUEHSJ #2802 3552149
ZNR UUUUU ZZH
R 212149Z DEC 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 6887
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
UNCLAS SAN JOSE 002802 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ETRD EINV ECIN PGOV CS
SUBJECT: COSTA RICA'S INSURANCE MONOPOLY PREPARES FOR COMPETITION

UNCLAS SAN JOSE 002802

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ETRD EINV ECIN PGOV CS
SUBJECT: COSTA RICA'S INSURANCE MONOPOLY PREPARES FOR COMPETITION


1. SUMMARY. Costa Rica's legislature has commenced hearings on
legislation to open up the government's insurance monopoly to
competition, a requirement of CAFTA-DR. Meanwhile Costa Rica's
Instituto Nacional de Seguros,(INS,)is making plans to modernize and
prepare for an open market. INS plans to hire a consultant with
international insurance experience to offer advice on strengthening
infrastructure and personnel. INS officials have also signaled an
intent to compete in the insurance market throughout Central America
and plan to enter the Nicaraguan market first. END SUMMARY.

_ _ _ _ _ _ _ _ _ _

Legislative action to break the insurance monopoly
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2. The Costa Rican legislative assembly's economy committee is
currently working on legislation to open the insurance market.
Although the opening of the government monopoly is required by
CAFTA-DR, press reports indicate that many believe it is time to
introduce insurance competition regardless of CAFTA's fate. Despite
that, the committee's deliberations are not a slam dunk. Over 200
motions have been filed with the committee, of which about 100 have
been processed. The committee's pace will quicken in 2007 as
additional hearing dates are added to the normal twice weekly
schedule. Among the most contentious issues are how to finance the
country's fire fighting force (which is currently funded by INS),
the creation of an independent insurance regulator, and the method
for financing infrastructure and personnel improvements at INS.

_ _ _ _ _ _ _ _ _ _

INS MONOPLOY HAS BECOME SLUGGISH
_ _ _ _ _ _ _ _ _ _


3. INS is a moribund autonomous governmental entity that has
obsolete equipment and lacks modern technical capacity to manage
information. Due to its monopolist position, INS has yet to develop
a culture of customer service that will be necessary to compete
effectively in an open market. This past year INS has been the
subject of considerable negative press regarding inefficiency,
computer malfunctions, previously unknown perks received by its
employees and possible corrupt payments made to former officials.

_ _ _ _ _ _ _ _ _ _ _

THE MULTIPLE ROLES OF INS
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4. INS is not only the single source for insurance products in
Costa Rica, but it has operating responsibility for a number of
quasi-insurance related activities. INS financing of the country's
fire departments is one example. In addition, when traffic
accidents occur, vehicles may not be moved, even when causing
massive traffic jams, until an INS inspector arrives on the scene to
investigate the accident. INS is also responsible for collecting the
annual "marchamo" fee in Costa Rica, a combined road tax and
liability insurance premium. Poor information management practices
were apparent recently when INS failed to exonerate road tax
payments from the annual "marchamo" fee levied on the nation's
accredited diplomats, including U.S. Embassy staff, which resulted
in erroneous billingss ranging from $700-$1,000 instead of the
expected US$40).

_ _ _ _ _ _ _ _ _ _

INS LOOKS TO THE FUTURE
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5. Recent press accounts indicate that INS will soon issue a request
for proposals in the search for a consultant with international
insurance experience that can help the organization plan for
infrastructure, insurance products and personnel improvements that
will be needed to be competitive in an open market setting. INS
officials appear to have an interest in expanding operations
throughout Central America, a plan they will first test in
Nicaragua.

LANGDALE