Viability Analysis of Brazilian Market for Universal Life in Brazil

Viability Analysis of Brazilian Market for Universal Life in Brazil

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Universal Life (UL) is a widespread type of personal insurance in many countries around the world. lts design combines the protection of bife insurance with the income provided by investment funds, through profit sharing, transparency of individual accounts and flexíbility of premium contributions - its main attractiveness. Due to the absolute absence of local works on this subject and considering the lack of definition about the product regulation by the Brazilian Insurance authority, the objective of this work is to evaluate the viability of UL in Brazil from two perspectives:(i) from the individual point of view of contractors, considering different profiles of cliente and investment scenarios, and; (ii) from a business perspective, verifying whether insurers see Universal Life advantages in its business. The results indicate that the insured would be better off buying UL than buying bife insurance on the open market and investing the surplus in financial investments because of the product's hybrid characteristic and associated opportunity costs. From a business perspective. the resulta of profit testing suggest that there will be incentives to offer UL as long as the operation has a long term duration. In addition. by conducting various sensitivity analyzes by changing the company's mortality pattern, contract type, and investment profile, all results point to a similar way. Therefore, the Brazilian market for Universal Life is viable, and the findings are influenced by the context of higher interest rates relative to countries where UL is already widespread.

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