Formosa province adheres to worker compensation law

Argentine province Formosa has become the 11th to adhere to the country's overhauled worker compensation law.

Bringing down high levels of litigation is one of the main challenges facing Argentina's insurance sector.

Formosa provincial lawmaker Osvaldo Zárate of the Cambiemos coalition said "this law puts an end to litigation which constrains job creation and the growth of SMEs," a statement from the central government's worker compensation watchdog SRT said.

In a bid to curb high levels of litigation, changes were made in January 2017 to associated legislation. These include new claims procedures and rules.

Formosa joins Buenos Aires city, Buenos Aires province, Córdoba, Mendoza, Río Negro, Entre Ríos, San Juan, Tierra del Fuego, Jujuy and Corrientes.

IMPACT

The new law has resulted not only in a drop in the number of claims but also in the average rate charged by the local insurance industry to provide ART coverage, SRT said.

In January this year, on average, insurers charged the equivalent of 3.14% of a worker's salary, down 10% compared with that charged before the law came into force, it added.

The drop works out to combined savings for employers of 4.8bn pesos (US$238mn), according to SRT.

OVERVIEW

The automobile and worker compensation sectors have consistently accounted for over 75% of the non-life market over the past five years, according to a country report from rating agency AM Best.

The overall industry tends to post underwriting losses. In 2016, the underwriting performance of the non-life segment deteriorated, with the worker compensation line the main contributor to the loss, AM Best said.

The overall industry, however, is growing. A key driver is Argentina's strengthening economy. Also, penetration levels are low.

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