How is Qualitas responding to the low penetration rate for auto insurance in Mexico?
First of all, our penetration in the Mexican market is around 30%. This means we still have about 70% of the market that is up for grabs. So how can the car industry and auto insurance continue to grow? It depends on consumers' purchasing power. The country has an opportunity to increase the purchasing power of people, and we believe that will be developing over time. That means that even though penetration is relatively low now, if you take the right actions and develop the right product, people will buy more. We also have something called ODQ, which is a project we started in 2011 to put small offices in small towns. We have increased coverage in that way. With that, business grows. When you do this kind of business, it does not matter how big the market is, but what you do with that market. In addition, it is expanding. The coverage we are doing will also increase participation. The market is not going to come to you. You have to go to the market. We also insure 50% of the truck fleets around the country. In that area, we know that we are much better prepared to provide services to large fleets around the country.
How is the shared economy affecting your business, and how are you adapting to these kinds of trends?
In the end, someone has to purchase the car and insure it, whether its a personal car or a car meant to be used in applications for transportation. We do not see these kinds of apps replacing the entire automotive market any time soon. Millennials may not buy cars, but they will probably use these applications for sharing cars. In terms of mobility, as long as there is a need for drivers or cars, we will be there providing the market with insurance. The model may be changing, but there will always be a need for cars. I am sometimes asked about autonomous vehicles, but I always say I am not that concerned about them for Mexico, at least in the next five to 10 years. There is still a lot of infrastructure needed. The cost of driverless technology is expensive. In order to switch, there will be huge costs, and market penetration is not going to be very big. It is something that I am sure will happen, but it is not close so we are not concerned yet. I have seen studies that say the premium for car insurance will shrink because autonomous driving cars will be less likely to have accidents. Still, this kind of technology will not be widespread in Mexico in the next 10 years.
In what ways do your subsidiaries compliment your business strategy?
The creation of subsidiaries is tied to our low-cost strategy. By having them, we believe we have been able to control costs better than our competitors. We have Cristafácil, Easy Car Glass, Outlet de refacciones, and many more. As long as they are aligned to our basic strategy of low cost, we will continue investing in those types of companies. It allows us to maintain the right cost structure in our business and have lower costs overall. All of our subsidiaries have proven themselves in fulfilling that objective.
What are your main priorities when it comes to the company's international expansion over the medium term?
In March 2019, we acquired an insurance company in Peru, and we are going to be looking at opportunities there as they appear. We are not taking an active role, but if they are presented to us we will certainly consider more. Central America is relatively small and is not of much significance in terms of volume. However, we are servicing the border with the US and three of the four states along it, California, Texas, and Arizona. We are not intending to compete with big players there, but instead focusing on the market of people who live in those states and commute across the border frequently. That market has grown nicely, and so has our subsidiary along with it. Peru is our newest market. It is interesting because its comparable to the Mexican market. It also has more potential in terms of market size. Penetration rates also sit around 30%. We are putting all the business in place to see how far we can go with the model that we have in Mexico in Peru and South America. We will continue checking out opportunities as they arise to see if we can replicate our model successfully. In the US, we have created a totally different model to comply with the specifications of the US market, which is highly regulated. There are different regulations there, compared to other countries. There are limits as to what you can and cannot do. Still, we maintain our focus on service, costs, centralization, and specialization. We are happy with what we have seen so far with our expansion outside Mexico.
What are your main goals and priorities for the rest of 2019 and 2020?
Our target is to make sure we have top-notch services. As long as that is the case, we will attract more business. My strategy is to empower the company to make sure we can maintain that target. We are technologically advanced, too. We have a new automated model for customer service as well as tracking vehicles for drivers. We are also testing three or four new technologies in these areas. We believe we have the best technology already. Our customers always tell us that, especially when it comes to the big fleets. We want to make sure we keep pace with anything new that comes to our industry. We are not limiting ourselves. If customers want to buy through an agent, they buy through an agent. If they want to buy through an office, they can buy through an office. If they want to buy online, that is okay too. We have to be sure to do the basics and do them well. In this way, we will continue to be successful, and I have no doubt about that at all. The important thing is to be close to the customers and understand their needs. As long as we can fulfill their demands, we know we can succeed. Every person who works for Qualitas is geared toward that, and, in this way, we can outdo our competitors. I suggested that the best way we can celebrate our 25th year is not by having a big party, but by having a record year. We had a record year in 2018 and, to me, that is the best celebration we could have. If you ask me what is going to happen in 2019, I would tell you that we will break that record by far. So far, 1H2019 is already showing that we can set a new record. As long as we keep working in this way, we are going to achieve even more success.