By virtue of an indication presented to the current bill of market agents, there is a draft bill which aims to modify the Chilean Commercial Code in order to incorporate the obligation for the financial institutions to carry the cost of the insurance associated with loans.
The project, as written today, implies:
- The elimination of additional insurance coverage associated to loans, allowing only the sale of those exclusively destined to guarantee the payment of the credit to the financial institution(insurance would only be admitted where the beneficiary is the financial institution, and only for the coverage of the specific risk of “non-payment of the credit”); and
- The insurance premium associated with financial services or products would correspond equally to the financial institution and the client.
If the project is approved as is, it is estimated that this cost associated to the insurance premium associated to the loan, would be passed on by the financial institutions to the clients, which would directly imply (i) a risk of the viability of mass market insurance (associated costs / risks) and (ii) a risk –which has already been warned by the Central Bank- of an eventual crisis due to a possible impact on the limits of the maximum conventional rate which would mean that clients would seek for informal financing alternatives.
The draft bill is still under discussion.
