Interview: OBG talks to Raúl Fernández Maseda, President, Mapfre Colombia
What initiatives are under way to increase insurance penetration?
RAUL FERNÁNDEZ MASEDA: Although sector performance has been very good, surpassing GDP for the past 10 years, penetration is still low, keeping Colombia below the Latin American average. The insurance industry represented more than 3% of GDP in the region, while in Colombia it registered 2.48% in 2012. The industry is positioning itself well by adapting international standards under a number of regulatory developments, including the liberalisation of the insurance market, increased capital requirements and the reform of the health system, among others. These regulatory upgrades are enhancing the sector’s future prospects. Our expectations for the medium term are that the sector will experience natural growth as the quality of life increases and GDP continues to expand at a rate of over 4%. Furthermore, we expect the sector to accompany the progressive redistribution of income that will increasingly encourage people from lower strata, who traditionally lacked access to and sufficient knowledge of these products, to purchase insurance. For this new type of customer, the insurance industry is designing a series of products, such as microinsurance. Although disorganised until now, public and private actors, such as the Insurance Superintendence, and some of the largest companies, have started working on positive initiatives, including education plans and collaboration schemes with local entities that have a greater presence in popular neighbourhoods, like utility centres and supermarkets. From a corporate perspective, there is ample room for growth in insuring small and medium-sized enterprises (SMEs). Nonetheless, the joint effort between the more traditional insurance distributors – brokers, banks and retail outlets – and the aforementioned collaborators has contributed to a substantial increase in the sector’s approach towards SMEs.
What is being done to ensure the purchase of compulsory insurance, such as traffic cover?
FERNÁNDEZ: A large number of people are not covered by mandatory insurance because of the high level of informality. This situation hits the insurance industry twice; first, because of the lack of protection enjoyed by material elements such as vehicles, and secondly, because it will not be possible to compensate any person who is a victim of an accident where the party at fault has no insurance. However, Colombia has been taking fundamental measures against informality, including promoting formal employment through a reduction in payroll taxes in the last tax reform and decrees such as the First Employment Act, initiatives from which our sector will undoubtedly benefit.
How attractive is the health system for insurers?
FERNÁNDEZ: The case of the health system is very complex since there is a wide spectrum of actors involved in risk coverage. In addition to occupational risk insurers, Colombia has institutions that provide special risk coverage (known as prepaid), health care insurers, health promoting entities (which not only insure but can also provide health services), and traditional insurance companies like us.
Law 100 of 1993 was a turning point for the health system 20 years ago, as it formalised and equalised access to health care through social security. However, coverage has been interpreted too broadly – to the extent that the judiciary has required almost everything to be funded by the system. Meanwhile, the institutions that are responsible for managing health resources have made sizeable errors. This series of events has led the government to initiate a reform process that will address the complexity and multitude of actors, which can cause duplication and triplication in coverage at times. The new law is likely to increase control over the use of resources in an effort to ensure the system’s efficiency.
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