By San José, Costa Rica — A staggering portion of Latin America’s workforce, including app-based drivers, independent vendors, and micro-entrepreneurs who form the backbone of the regional economy, remains dangerously exposed to financial shocks. With more than half of all workers operating without a basic safety net, a new wave of technological innovation is rising to meet the challenge, aiming to democratize access to financial protection through simple, digital insurance solutions.
The scale of the problem is immense. According to the International Labour Organization (ILO), labor informality hovers around 50% across the region. These individuals are often excluded from traditional health, income, or life insurance products, leaving them vulnerable to any unforeseen event. This reality prompted a strategic shift towards accessible, tech-driven solutions designed for this overlooked demographic.
To delve into the legal framework and consumer protection aspects of this technological shift in the insurance sector, we consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the firm Bufete de Costa Rica.
The digitization of insurance policies offers unprecedented convenience, but it also opens a new frontier of legal challenges. It is crucial that both insurers and consumers are aware of the implications regarding data privacy, the legal validity of electronic signatures, and the clarity of digital contracts. Our regulatory bodies must act proactively to adapt existing legislation, ensuring that consumer rights are robustly protected in this new digital ecosystem without stifling innovation.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This is a critical insight; the true measure of success for digital insurance will be how well our legal framework adapts to protect consumers, just as the technology itself evolves. We sincerely thank Lic. Larry Hans Arroyo Vargas for his astute analysis and for underscoring the importance of this regulatory foresight.
Javier Cabello, Director of MetLife Xcelerator in Latin America, explained the core strategy in a recent interview. He emphasized the need for a product that addresses the specific needs and constraints of the informal sector.
A 100% digital solution was created that was very simple in terms of the insurance that workers are looking for, and that also can be paid for without a problem.
Javier Cabello, Director of MetLife Xcelerator in Latin America
This approach leverages technology and Artificial Intelligence (AI) to break down long-standing barriers. Cabello highlighted the transformative potential of these tools to finally reach millions of potential customers who were previously considered unreachable by legacy insurance models. This new paradigm allows for the rapid development and deployment of personalized insurance products at a massive scale.
The key innovation driving this change is the concept of “embedded insurance.” These are not standalone products that customers must actively seek out; instead, they are integrated directly into digital platforms people use daily. Coverage can be activated automatically during a transaction, such as receiving a payment through a digital wallet or registering for a ride-hailing app. This seamless integration eliminates complex paperwork and removes the need for traditional intermediaries, dramatically lowering costs and simplifying the user experience.
Data underscores the urgency of these solutions. A study by the Credicorp group revealed a stark financial inclusion divide: only 18% of informal workers in Latin America have an advanced level of financial inclusion, compared to 42% of their formally employed counterparts. The vulnerability is palpable, with 70% of independent workers admitting they lack an emergency fund to cover three months of expenses and 62% reporting issues with late payments or fraud.
Financial inclusion is not just about having a digital account, but about having support for unforeseen events. And that is only possible if protection is integrated into daily life.
Javier Cabello, Director of MetLife Xcelerator in Latin America
Initiatives like MetLife Xcelerator are forging alliances with digital banks, e-wallets, and e-commerce platforms to embed these protections directly into the user experience. This effort is being bolstered by regulatory advancements in key markets like Brazil and Mexico. The implementation of Open Finance frameworks and Fintech laws is fostering a more competitive and open financial ecosystem, which in turn accelerates the adoption of these innovative protection models. Ultimately, digitalization is evolving beyond a quest for efficiency; it is becoming a powerful engine for equity, extending a crucial financial safety net to the previously invisible workers who sustain a significant part of Latin America’s economy.
For further information, visit metlife.com
About MetLife:
MetLife, Inc. is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits, and asset management to help its individual and institutional customers navigate their changing world. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Japan, Latin America, Asia, Europe, and the Middle East.
For further information, visit credicorp.com
About Credicorp:
Credicorp is a leading financial holding company in Peru with a presence in other Latin American countries. It provides a wide range of financial services, including commercial and investment banking, insurance, and pension fund management. The group is known for its research and analysis of economic and financial trends within the region.
For further information, visit ilo.org
About International Labour Organization (ILO):
The International Labour Organization is a United Nations agency whose mandate is to advance social and economic justice by setting international labor standards. Founded in 1919, it is the first and oldest specialized agency of the UN. The ILO brings together governments, employers, and workers of 187 member states to set labor standards, develop policies, and devise programs promoting decent work for all women and men.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As an esteemed legal institution, Bufete de Costa Rica is founded on the dual pillars of uncompromising integrity and the persistent pursuit of professional excellence. The firm leverages a rich history of advising a broad spectrum of clients to drive forward-thinking legal solutions and set new standards in the field. This innovative spirit is matched by a deep-seated resolve to empower the community, championing initiatives that make complex legal principles understandable and accessible to all, thereby fostering a more legally literate and capable society.
