Brazil recession drives stronger demand for education insurance

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Friday, February 17, 2017

Education-related insurance products in Brazil registered a significant expansion last year.

Data from insurance and pension federation FenaPrevi show an 81.0% increase for the sector in January-November 2016 when compared to the same period the year before, according to industry blog Sonho Seguro.

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Premiums totaled 44.0mn reais (US$14.2mn) in the first 11 months of last year.

FenaPrevi said the increasing interest in educational insurance was related to Brazil's economic crisis and the growing number of payments in default at private schools, which are common in the country for children attending elementary and high school.

In São Paulo alone, the average percentage of defaults registered by private schools during January-November was 8.83%. This is the highest rate since at least 2011, according to the São Paulo state's union of educational institutions Sieeesp.

Bruna Timbó, the director of brokerage firm LTSeg who is responsible for the implementation of various insurance programs for educational institutions, said that purchasing an educational insurance policy is an efficient way for schools to avoid losses related to non-payment.

"But the advantages are not only for the educational institution," she said. "The students, in fact, benefit the most, because the educational insurance gives them the possibility to continue their studies in case the person financially responsible for them fails to fulfill their obligation to pay their tuition."

Timbó also noted that the rates for purchasing this type of insurance vary from 0.5% to 2% of a monthly school payment.