Insurance - updated on Mar 30 at 12:45 pm
Commercial Partnerships with Insurance Companies
Given the unprecedented times we are living, it is necessary to review the contracts between insurance companies and certain of its partners regarding the distribution of its products, such as retailers, travel agencies, car retailers, banks, etc.
Generally, these partners enter into partnership agreements with insurance companies either by entering into insurance representation agreements or insurance stipulations. These contracts usually contain aggressive provisions to encourage the offering of insurance linked to products/services offered, providing for fines in case of breach or lack of compliance and, in some situations, even the termination of the contractual relationship if certain goals are not reached.
The potential economic effects caused by COVID-19 already worry companies from the most diverse sectors. The increase in the unemployment rate and the impoverishment of the population seem to be inevitable, as well as an increase in defaults and the closing of businesses.
In certain situations, the end of the relationship may be inevitable, but it is very important that insurance companies are alert and negotiate with insurers the best way to either end the relationship or to maintain it to avoid losses to policyholders.
In the case of banking distribution channels, generally structured in the form of insurance stipulation, the increase in customer default will impact the loss ratio in some lines and several discussions may arise. It is highly recommended that such partnerships are also carefully analyzed to predict the new reality.