VZCZCXYZ0000
RR RUEHWEB

DE RUEHSJ #2802 3552149
ZNR UUUUU ZZH
R 212149Z DEC 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 6887
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS SAN JOSE 002802 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRDEINVECINPGOVCS
SUBJECT: COSTA RICA'S INSURANCE MONOPOLY PREPARES FOR COMPETITION 
 
¶1. SUMMARY.  Costa Rica's legislature has commenced hearings on 
legislation to open up the government's insurance monopoly to 
competition, a requirement of CAFTA-DR.  Meanwhile Costa Rica's 
Instituto Nacional de Seguros,(INS,)is making plans to modernize and 
prepare for an open market.  INS plans to hire a consultant with 
international insurance experience to offer advice on strengthening 
infrastructure and personnel.  INS officials have also signaled an 
intent to compete in the insurance market throughout Central America 
and plan to enter the Nicaraguan market first.  END SUMMARY. 
 
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Legislative action to break the insurance monopoly 
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¶2. The Costa Rican legislative assembly's economy committee is 
currently working on legislation to open the insurance market. 
Although the opening of the government monopoly is required by 
CAFTA-DR, press reports indicate that many believe it is time to 
introduce insurance competition regardless of CAFTA's fate.  Despite 
that, the committee's deliberations are not a slam dunk.  Over 200 
motions have been filed with the committee, of which about 100 have 
been processed.  The committee's pace will quicken in 2007 as 
additional hearing dates are added to the normal twice weekly 
schedule.  Among the most contentious issues are how to finance the 
country's fire fighting force (which is currently funded by INS), 
the creation of an independent insurance regulator, and the method 
for financing infrastructure and personnel improvements at INS. 
 
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INS MONOPLOY HAS BECOME SLUGGISH 
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¶3.  INS is a moribund autonomous governmental entity that has 
obsolete equipment and lacks modern technical capacity to manage 
information.  Due to its monopolist position, INS has yet to develop 
a culture of customer service that will be necessary to compete 
effectively in an open market.  This past year INS has been the 
subject of considerable negative press regarding inefficiency, 
computer malfunctions, previously unknown perks received by its 
employees and possible corrupt payments made to former officials. 
 
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THE MULTIPLE ROLES OF INS 
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¶4.  INS is not only the single source for insurance products in 
Costa Rica, but it has operating responsibility for a number of 
quasi-insurance related activities.  INS financing of the country's 
fire departments is one example.  In addition, when traffic 
accidents occur, vehicles may not be moved, even when causing 
massive traffic jams, until an INS inspector arrives on the scene to 
investigate the accident. INS is also responsible for collecting the 
annual "marchamo" fee in Costa Rica, a combined road tax and 
liability insurance premium.  Poor information management practices 
were apparent recently when INS failed to exonerate road tax 
payments from the annual "marchamo" fee levied on the nation's 
accredited diplomats, including U.S. Embassy staff,  which resulted 
in erroneous billingss ranging from $700-$1,000 instead of the 
expected US$40). 
 
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INS LOOKS TO THE FUTURE 
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¶5. Recent press accounts indicate that INS will soon issue a request 
for proposals in the search for a consultant with international 
insurance experience that can help the organization plan for 
infrastructure, insurance products and personnel improvements that 
will be needed to be competitive in an open market setting.  INS 
officials appear to have an interest in expanding operations 
throughout Central America, a plan they will first test in 
Nicaragua. 
 
LANGDALE