TBY talks to José Ramón Tomás Forés, Executive President of MAPFRE Mexico, on the greater need to improve insurance penetration at the individual level and increase household coverage.
TBY How would you define MAPFRE’s position in the Mexican insurance market?
JOSÉ RAMÓN TOMÁS FORÉS MAPFRE has experienced an annual growth rate above the average in the Mexican market thanks to its wide presence across the country, its innovative products, and superb business model. We are also constantly on the look out for new distribution channels enabling us to reach other segments of the population.
What products are most in demand?
Without any doubt, despite the absence of mandatory civil liability insurance for third-party damage as a result of traffic accidents, car insurance continues to be the most requested product in the market. However, we consider that when civil liability insurance for third-party damage becomes mandatory, the market share of this insurance line will increase and contribute to the growing financing culture of the population. Likewise, industrial risk insurance is requested by major corporations. Other popular policies include health and, of course, micro-insurance; however, there is still a lot to be done in that regard.
What are your strategies to increasing the presence of MAPFRE products in the market?
The first strategy is geographical expansion. MAPFRE has actively worked since the beginning of its operations in Mexico on its geographical expansion project to make its insurance products and services available to most of the population. MAPFRE currently has 400 offices strategically distributed around the country, mainly based on demographic, social, economic, and commercial development criteria. Regarding the permanent innovation of our product lines, we have developed important strategies such as designing and distributing low-cost insurance products—or “micro-insurances”—to promote low-income individuals’ access to insurance. Furthermore, we want to introduce standardized basic products aimed at meeting the specific insurance needs of people against death, accidents, diseases, and civil liability in the automotive field. We work to encourage ongoing innovation in order to offer the best insurance products with a great variety of coverage at flexible rates tailored to the individual. We are also looking to expand our distribution channels through the internet, telephone marketing, microfinance companies, and department and self-service stores.
What are the challenges in the insurance market?
From our point of view, the main challenges that the Mexican insurance sector faces include the limited development of the sector, security issues, which have caused a 72% increase in car theft since 2006, natural disasters, and the implementation of the Solvency II scheme for the Mexican insurance sector, the enforcement of which is foreseen in 2014 based on risk control and the establishment of efficient corporate governance.
Other issues include the lack of mandatory insurance covering civil liability for damage caused to third parties, namely injury and damage to property as a result of traffic accidents, the need for comprehensive tax reform, and the necessity to modify labor legislation.
What are some of the main changes the insurance market should expect going forward?
The main changes the insurance industry will undergo include the introduction of mandatory civil liability insurance for automotive vehicles at a national rather than just a local level, amendments to the Federal Labor Law specifically affecting insurance institutions that consider insurance agents as employees of the companies for which they perform brokerage work without considering that such activity is independent, and the incorporation of a consortium or execution of an agreement with an international body providing stability in times of natural disaster. Furthermore, we foresee a reduction in security issues. There is no doubt whatsoever of the social function that insurance performs in any economy, although the specific effect is greater in developing countries, and the immediate and tangible benefits it offers are more obvious.
What characteristics distinguish the Mexican insurance market from its neighbors in Latin America?
Mexico, along with Brazil, is one of the 15 most important economies in the world, hence the country has very high development potential in all spheres, especially in insurance. Mexico is a leader in the region and it represents an excellent platform to position a company in the international marketplace. That is why most of the greatest European and American insurance companies are present in Mexico, holding leading positions in the sales rankings. The value of insurance premiums in Mexico does not exceed 2% of GDP, while the average in the region is 2.7%. Mexico does not have mandatory civil liability insurance for third-party damage resulting from car accidents. Our market is characterized by first-level regulation and a low insurance penetration rate.
How do you expect the insurance sector’s contribution to GDP to develop?
The Mexican insurance market is characterized by its low level of development, and this is caused by the lack of instruments or a suitable means for enabling the promotion of an insurance culture, the presence of would greatly increase penetration rates. Furthermore, only 4.5% of houses are insured, at least against fire. Major medical expense insurance covers only 5.8% of the population, provided the individual agreements represent only 2% of the total population, and 7.2 million people have a life insurance policy, provided the individual agreements represent 12.8% of the active population, and automobile insurance only covers 26.5% of all the cars on the road. In view of such a situation at the domestic level, MAPFRE has enthusiastically bet—considering it an opportunity—on the implementation of different strategies aimed at covering the deficiencies of the market with the intention to cover the needs and interests of many different segments of the population.
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