RAISING COLOMBIA’S INSURANCE PENETRATION

Colombia 2018 | FINANCE | INTERVIEW

TBY talks to Carlos A. Vélez Mejía, General Manager of Nacional de Seguros, on regulatory changes, employing experienced intermediaries, and the importance of being insured.

Carlos A. Vélez Mejía
BIOGRAPHY
Carlos A. Vélez Mejía has a law degree and a master’s in international business management from the Universidad Autónoma de Barcelona. Before his current position as the General Manager of Nacional de Seguros in Colombia, he served in management roles at ING Pensiones y Cesantías and Porvenir.

How would you evaluate your operations over the past year?

2017 has been a tough year for the insurance sector. The central government has not invested as expected in infrastructure and other areas of the economy. Colombia has placed the brakes on investment in all sectors. That directly affects the insurance sector, taking into account that we move in all the economic sectors. Perhaps new projects are being signed now; however, the new signings did not impact the dynamics of the sector until the end of 2017; it is possible that the market will experience the effects in 2018. On the other hand, it will be an election year and the first half of 2018 will have another rhythm as well. We are doing well, though it could be much better. We have approximately 5% of the market share and are increasing our production by approximately 15% YoY. We are not increasing our production as much as we like; however, the other companies are slowing down as well. Corporates make up about 90% of our clientele base.

In Colombia, there is huge potential due to upcoming infrastructure projects. How do you foresee the sector and your company evolving?

Unfortunately, Colombia has many regulatory changes that make it hard to plan a strategy in advance. In the past year and a half, the Superintendencia Financiera issued several rules for insurance companies that changed our entire business model. Some aspects have changed in a positive way; others, not as much. In the past two years, the regulator issued new reforms and regulations that changed the rules of the game. For example, there are predictions that a new tax reform will be implemented six months after a new president is elected. If we do not have tax stability, it will be difficult to reach sustainable growth and maintain satisfactory levels of foreign investment. In addition, the regulator in Colombia always looks to the best practices in other countries to adapt them in Colombia, which also makes the market change often. There is another issue that slows down the sector and the economy in general, and this is the banking level of the local population, which limits the growth of certain businesses such as insurance companies.

From a customer point of view, what is the difference in arranging a policy through a broker?

Our business model is based on the work of our intermediaries; we do not have a direct sales force, though those intermediaries are highly specialized. In Colombia, there are approximately 25,000 intermediaries for insurance. Of those, we employ just 60 because we are a specialized company and are only willing to work with experienced representatives. That sets us apart from the majority of the competition. Our intermediaries are true partners in our business model.

What initiatives is Nacional de Seguros taking to raise awareness of the importance of being insured?

Ours is not a massive insurance product; therefore, the low penetration in the market does not directly affect the company. Colombia's insurance penetration is 1.6%, while the global average is more than 6%. However, considering that we are a specialized company in a specific product for a corporate niche, these figures do not directly affect us. We attract companies that we would like to have in our portfolio directly and in association with brokers.

What are your goals and priorities for 2018?

We are an extremely new company and are still stabilizing our processes. Therefore, we first have to move past this stabilization process. We have to look to other sizes, and perhaps other and newer products. We are working on that right now.