The door opened, and Guillermo Constenla walked out of the back room into the front lounge of his airy office on the 14th floor of the National Insurance Institute (INS) building in downtown San José.
Wearing a shiny tie, he strutted up to the leather couch, plopped down on it and leaned back, leisurely crossing his legs.
Constenla speaks openly about the need for the biggest insurance company in Central America to open up to private competition.
“If this were a private company, we would have entered the Central American market last year,” he said.
The Institute’s president has made his way through Europe and Latin America as a businessman, and dipped into politics as a legislator and former Public Works and Transport Minister during the previous administration of President Oscar Arias (1986-1990). Now, at age 73, the father of five has found himself appointed by Arias to the top of one of the only state-run insurance monopolies in the world.
Unlike a similar proposal to open up Costa Rica’s state-run telecom monopoly – which has been cause for massive protests – proposals in the Legislative Assembly to open up the insurance monopoly to private competition are notably less controversial. Perhaps it’s because Constenla has about a fourth of the employees as the notoriously bureaucratic Costa Rican Electricity Institute (ICE).
Or perhaps it’s because INS is consistently ranked by business magazines as the top insurer in the region. Or perhaps it’s because people just don’t care as much about insurance as they do about their cell phones. If that’s the case, Constenla plans to change it by introducing a slew of new insurance options in Costa Rica and by expanding the region’s biggest monopoly beyond Costa Rica.
Constenla recently sat down with The Tico Times in his office on the top floor of the tidy INS building, which even has talking elevators. With the backdrop of a sweeping view of the Central Valley, he talked about what the institute is doing to prepare for a market opening, the hand he had in developing insurance reforms, and an initiative to offer tourist insurance.
TT:What is INS doing to prepare for the possibility it may soon have to compete?
GC:We’ve begun a process of restructuring, modernizing and strengthening the institution. We’re changing from a productcentric institution to making the most important thing the client. Without clients, there is no business. We’ve established a series of procedures to reduce costs for clients, by eliminating non-substantive expenses. The biggest problem we can run into is that our competition offers lower costs. We have to have a cost scheme to confront international insurance businesses.
We’ve begun alliances with public banks and cooperatives and other sectors to have a more solid front against competition. They’re becoming our partners in the business; they’re selling our insurance. It’s like opening 500 more offices in the bank branches where clients can buy our insurance.
How far along is that process?
We’ve given them all the authorization to go ahead and do it. They’re in the process of implementation.
What kinds of insurance does INS offer now and what changes or new services will INS offer if the market opens to competition?
We have all kinds of insurance: life insurance, accident insurance, travel insurance, student insurance, earthquake insurance, home insurance, credit card insurance,medical insurance, collective worker insurance. But that doesn’t mean we’re content. We’d like to offer more life insurance. For most insurance companies, an average of half of their services are usually life insurance and the other half accident insurance. Only 13% of our insurance is life insurance.
We’re also trying to offer new types of insurance, like with our Costa Rica Safe Destination program, which is tourist insurance that could be for $2 or $3.
Only 27% of Costa Rican homes are insured, and only 30% of cars have voluntary insurance for third parties. The insurance market here is virgin.
Also, we’ll have a different farm insurance scheme.We have a team coordinating with the Production Ministry (MIPRO) to create an insurance culture in the agricultural industry.
There’s so few of them insured that it doesn’t work. For insurance to work, you have to a have a large pool. Now, there’s fewer than 5,000 farmers insured. That’s very few.
Tell me more about the tourist insurance. What will it cover and when will it be available?
Tourist insurance will cover robbery, and even death.We’re in the process of structuring it.We need to have a lot of participation for it to work. We’re talking with the Costa Rican Tourism Institute (ICT). We want to offer it this year.We have a team working on it, in the negotiation phases. We’re seeing if there’s a wide enough base to do this. We want it to cost $2 or $3, but to do that, we’ll need all of Costa Rica’s 1.7 million tourists who come here each year to pay into the pool. Perhaps it could be included in the tax the Tourism Institute charges tourists.
Did you directly participate in designing the two bills in the Legislative Assembly that would reform INS and open up the monopoly to private competition?
This administration wants INS to stay, but we want it modernized, restructured, strong and competitive. It was this administration that sent the reform last year to the Legislative Assembly.
What will be the biggest change under the reform?
The biggest change is that it opens up the market to competition. It’s a change of concept, a change of vision to make our clients most important. Our vision will be to expand our alliances with different sectors of the economy. This institution has the technical capacity to compete. It’s a public institution.
If this were a private company, we would have entered the Central American market last year.We’re preparing to enter the Central American market in Guatemala, Honduras, El Salvador, Panama and Nicaragua. But it’s not so easy to implement decisions here. I hope we enter the regional market by 2008. Maybe even this year.
How many INS employees are there and will the restructuring mean layoffs?
We aren’t asking for layoffs. Better yet, we’ll need more people.We want to create a special force to offer life insurance, which will require 300 more employees. We now have 2,700 employees. But 1,200 of them don’t directly work in INS but in hospitals, the health sector and as firefighters. But obviously, if we’re going to enter the Central American market, we’ll need more employees.