Photo: Sofía Jaimes Barreto

Double Risk: the Adventure of Buying International Health Insurance in Venezuela

Some companies based in the Caribbean or other regions took advantage of delayed legislation to enter a desperate market

A version of this post was originally published at our sister site, Cinco8.

In 2016, when health insurance in dollars became available in Venezuela, it was seen as a solution for very few citizens. It generated very particular irregularities, like clause changes in contracts without previous notice, products that didn’t offer deductibles (they had to be paid by the policyholders themselves), fake policy information by intermediaries, reimbursements that took months to be paid, if they were paid at all… Since those insurance companies are based abroad without actual legal presence in the country, they didn’t have to comply with local laws and no one could really force them to do anything when the insured had a medical emergency for which he was paying in dollars.

Thus, insurance companies in Venezuela had the new problem of not just having to adapt to the fait accompli of spontaneous dollarization, they also had to deal with the harm done to the national insurance market by foreign companies who took advantage of a legal void and the need for insurance.

Starting the Race with Quite the Lead

After 2015, insurance companies in Venezuela began to feel the effects of the macroeconomic reality in the country. Coverage of insurance policies failed to cover the policyholders’ needs as months went by and hospitals ended up refusing patients with insurance in bolivars, since the amount covered wasn’t enough to pay, for example, an emergency admission. The minimum coverage was now the price for just a consult.

What was going on inside insurance companies was even more complicated: the Ley de la Actividad Aseguradora (Insurance Activity Law) of 2010 established that 50% of the company’s reserves must be held in national banks, and those reserves were now devaluating, with companies running the risk of not complying with some taxes obligations and failing their clients.

After the law changed, in 2015, new rules and procedures were established to offer insurance policies covering health, life, funeral, accidents, and its possible combinations in foreign currency. So, although the currency exchange control from 2003 was still in force, companies authorized by the Superintendencia de la Actividad Aseguradora (Insurance Superintendence) began the process to allow for products to be offered in foreign currency and those companies who already had these policies were verified by the regulating body.

By that time, several foreign insurance companies had made alliances with brokers and other insurers registered to the Superintendence (or through uncredited informal mediators), and had already been selling policies in dollars in the country.

But while national companies moved forward to offer these policies, foreign companies without a local address or legal representation managed to secure the first sales.

It was at the end of 2018 and early 2019 when national and authorized insurance companies in Venezuela began to offer their products in dollars. By that time, several foreign insurance companies had made alliances with brokers and other insurers registered to the Superintendence (or through uncredited informal mediators), and had already been selling policies in dollars in the country.

This damaged the Venezuelan insurance market. María del Carmen Bouffard, president of the Cámara de Aseguradores de Venezuela (Venezuelan Chamber of Insurance), explains: “What happened between 2016 and 2018 is illegal, a crime. These foreign companies which, for the most part, are located in islands of the Caribbean, don’t have reserve stockpiling nor referrals. They don’t comply with the laws in money laundering prevention, they change clauses within the insurance contract without notice, they don’t pay income tax, large financial transactions taxes, and municipal taxes… They don’t generate revenue on the Fondo Público Nacional de la Salud (National Health Public Fund) or the Superintendence. They aren’t regulated.”

Although the Chamber has denounced this situation to the Superintendence, penalties would be hard to apply: foreign companies offer high commissions to intermediaries and even if their credentials for mediating with national companies are withdrawn, they can still sell products independently.

This “business” is still up and on the rise, although it still has dangers, as the criminal lawyer Fermín Mármol García explained in an interview for Hispano Post in October of 2020: “The problem will come from that foreign company that isn’t bound by local laws. They practically leave [the policyholders] exposed to possible frauds. In Venezuela, violent crime gets all of the attention. No one pays attention to intellectual felonies, because the impact, from the emotional point of view, is lower.”

In the end, buying an insurance policy without a Venezuelan address or legal representation in national territory, means you’d have to go yourself to the home country of the insurance company to start a legal complaint, when there’s no response from them after an accident or loss.

Running in a Minefield

On top of the eight years of economic recession, four with hyperinflation, and four of illegal insurances, other factors have impacted the ability of authorized insurance companies to function in Venezuela.

Buying an insurance policy without a Venezuelan address or legal representation in national territory, means you’d have to go yourself to the home country of the insurance company to start a legal complaint.

The 2010 law established that the State’s civil servants’ insurance had to go to the four insurance companies owned by the State. Private insurance companies lost hundreds of thousands of clients, and policyholders were left with useless coverages. Then, mass migration and the shutdown of companies made the Venezuelan insurance client list even smaller. Marjorie Guerrero, an insurance advisor, explains: “Undoubtedly, national insurance companies saw a great opportunity in dollarized policies, but they have had to adapt to the people’s economic limitations. So, standards have changed. One of the changes made is that some insurance premiums which used to be paid yearly or by credit, are now paid for in instalments, payments free of interest that can be done on a monthly basis.”

Right now, it’s possible to find modest insurance coverages and premiums which vary according to the financial capacity of each company, and the fee approved by the Superintendence.

With the arrival of COVID-19, according to Bouffard, a notable change occurred: “Although epidemics in Venezuela and other countries are excluded from coverage, since they are risks which are very difficult to assess in order to calculate the premium, most national companies decided to cover their policyholders. They assumed their social responsibility and none of those companies charged premiums to cover those obligations, in spite of them having to make large investments to guarantee that particular service, from call centers and transporting employees with all the restrictions in place, to unusual operating costs such as installing electric generators in parts of the country.”

In late March, another change worried the policyholders: there’s now a maximum amount allowed for hospitalization by Coronavirus, as established by the Superintendence. According to Bouffard, this was calculated after a year going through the number of incidents and the price increase of health care centers, so as to make medical attention possible, each insurance company will analize how to proceed.

But the concern remains. As long as the economic crisis continues, any agreement and solution will be temporary, since planning and budgeting during hyperinflation carries the risk of prices staying behind, with the same consequence seen in 2015: dollarized policies that not even like that can help.

Kaoru Yonekura

Venezuelan writer and the winner of the Gabo Foundation Journalism for Solutions scholarship.