Compare car insurance conditions in Brazil and the USA

Information about the car insurance market in the United States and Brazil makes an important contribution to anyone who wants to better understand the insurance industry.

The American private institution “Insurance Information Institute” released some updated statistical information about the car insurance market in the United States. This information exists to improve the public's understanding of insurance, understanding what it is for and how it works. Information from the Insurance Information Institute, created in 1959 and headquartered in New York, is distributed to the media, governments, organizations, universities and the general public.

This is data that, compared to the Brazilian car insurance market, contributes significantly to an analysis of this growing and complex branch of the insurance industry, being essential for anyone who wants to understand more about the subject.

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The American and Brazilian insurance markets

In the United States, the insurance market in general and the automobile insurance market in particular is much larger than the Brazilian one. In 2010, American insurers earned US$160 billion, while in Brazil the movement of premiums was US$13.1 billion. Americans seek insurance to have the protection of indemnifying third parties. Brazilians aim to replace the loss of their own vehicle.

In the Brazilian market, coverage is for the vehicle itself

Americans allocated $62.6 billion for their own vehicle losses and $97.7 billion for liability-related coverage, which compensates for losses caused by the insured. In Brazil, the proportion is reversed. There were US$ 10.6 billion for the insured vehicle and US$ 2.5 billion for third parties, harmed by the insured.

It should be noted that the Brazilian context differs essentially from the American one, due to violence, which alters the daily lives of Brazilians. According to the National Insurance Confederation – CNSeg, in 2015, the robbery rate reached 57 vehicles per hour in Brazil, totaling 1,368 cars per day. Therefore, car insurance in Brazil is essentially aimed at the vehicle itself to face possible theft and not just thinking about the cost of an accident.

Insurance for damages to third parties

With the resumption of car sales in Brazil and an increase in awareness about the risk that is assumed in traffic and on the roads, it is to be expected that there will be an increase in the purchase of civil liability insurance with higher coverage, which could cover the real costs of replacing losses caused to third parties.

Brazil still represents 8% of the American market, but the proportion of insurance purchased with civil liability for damages to third parties is relatively small, just 3%. Own vehicle insurance is 17%.

Compensation in Brazil for collision claims is higher

Analyzing collisions with insured vehicles, in 2010, in Brazil the proportion was 7.2%, while in the USA the proportion was lower, 5.7%. The average compensation paid in Brazil for collision claims is higher than the American one, reaching US$3,381, while in the USA the average is US4,2,776. Experts explain this difference as being related to higher taxes in Brazil, exchange rate factors and greater concern among Brazilians about the condition of their vehicle.

In Brazil, 10 largest insurance companies hold 93% of the market

Market concentration among the largest insurers also shows distinctions. In 2010, the ten largest American insurers held 68% of the revenue of the entire auto insurance market. In Brazil, during this period, the revenue of the 10 largest was 93%.

Among the five largest Brazilian insurance companies, Seguro Bradesco is linked to the third largest bank in the country. After 2010, the insurance company Porto Seguro, the largest in the country in terms of car insurance, joined Banco Itaú, which is the largest private Brazilian bank. The Spanish insurance company Mapfre is currently associated in partnership with Banco do Brasil, the largest bank in the country. SulAmérica and Liberty are independent insurance companies and are among the five largest in Brazil.

Size of the car market – makes a difference

Until 2014, the Brazilian automobile market had a total of approximately 45.4 million vehicles. This is very important data to compare the difference between the insurance market in Brazil and the USA. The numbers are not exact, because there are no updated statistics, as it is not known exactly how many vehicles are no longer on the road, due to theft and dismantling, accidents or aging. The insurance industry estimates that only 10% of these vehicles have some form of insurance protection.

In the United States, considering cars and utility vehicles, excluding buses, trucks and motorcycles, there are around 125 million vehicles, according to 2011 data from the World Bank. The proportion is one car for every 2.4 people. In Brazil, there are 4.4 inhabitants for each individual car.

In the United States, 17.5 million vehicles were registered in 2016 alone. In the country, 100% of vehicles have at least one civil liability insurance policy, with compensation of at least US$50,000. No car is left without insurance coverage.

The motivation to take out insurance goes beyond the fear that something will happen to the car or to third parties, it is a cultural issue. The concept is that, when you drive on the streets or when you pick up a new car from a dealership, you cannot run the risk of injuring someone or hitting other people's property without at least having a civil liability policy. In many states, this is a requirement provided by law and this is mandatory insurance in the state of Florida, for example.

Therefore, the basic insurance policies are PIP, to cover the owner's medical expenses, and PD, to cover third-party damages, neither of which covers damage to the owner's car. This is because the property of the third party, who was the victim of an accident, is protected and the system prevents the person causing the accident from causing losses to the state, using hospitals without having health insurance.

Furthermore, if the person causing an accident does not have insurance and is unable to compensate for the damage they caused, they will simply go to jail, as the lack of money is not considered a justification for not paying compensation.

Regarding rented cars, insurance is also essential. There, insurance sold together with vehicle rental is not a strategy for rental companies to earn extra money. The rental is sold as a package, along with insurance, so you don't run the risk of having problems if an accident occurs involving the rented car.

This strict system regarding drivers' liability for damages caused in an accident may seem somewhat authoritarian or exaggerated to Brazilians, but it brings many advantages. Surveillance in city traffic and on roads is also very effective. These are conditions that lead to a low frequency of claims and few people buy theft insurance, for obvious reasons relating to the difference in social issues and violence that exist in Brazil.