Interview: Mario Vela Berrondo
How would you characterise the strength and resilience of the insurance industry in the face of external and internal economic challenges?
MARIO VELA: Both the insurance industry and the broader economy have faced a number of challenges in recent years. However, the implementation of new initiatives, such as the Solvency II regulatory standards, has helped insurance companies develop a more robust corporate governance framework – one where risk management, work ethics and internal auditing have become key elements. A good example of how solid risk management can contribute to insurers’ growth and quantify their solvency levels is by addressing different options on the product and investment portfolio. The sector’s strength has allowed it to reach a greater number of families. According to a report issued by the National Commission on Insurance and Surety, at the end of the first half of 2019 direct premium in the insurance sector had increased by 8.6% year-on-year in real terms.
What are the main factors expected to augment the insurance penetration rate in the future?
VELA: With an average age of 27 years, demographically, Mexico is still a very young country. This population boom will likely contribute to increasing demand for insurance products in the future. While these generations are just starting their professional lives, they will need to protect their financial assets eventually. This is where insurance offerings can play a fundamental role, whether it is for personal or professional cover.
However, the government and the insurance industry have to start promoting risk awareness and educate this generation on the benefits of protecting their property. They need to learn how and where to invest, how to insure themselves and how to protect their families. The industry also needs to work on removing the stigma and prejudice surrounding the high cost of insurance products. While the Mexican market is quite price sensitive, it will be necessary to convey the message that upfront costs are actually lower than the benefits coverage can eventually bring to users. In addition to this, the Mexican Association of Insurance Companies should continue promoting the establishment of industry best practices.
Which products are helping to boost growth and penetration by diversifying the offering?
VELA: As the young population ages, they will inevitably spur demand for retirement and pension products. Insurance companies will therefore need to meet the needs of this particular segment, either with traditional products or investment solutions, such as universal platforms. At the moment, there is an opportunity to raise awareness about the insurance products that can help young Mexicans retire with sufficient funds to live they life they want. We must convey that retirement goals can be easily reached by saving at an early age without sacrificing their current income or lifestyle. Insurance products can help young people save little by little when any extra income comes; for instance, performance or Christmas bonuses.
Which digital technologies are being employed in the industry to expand and improve service?
VELA: As an industry, we need to adapt to digital trends and evolve to meet customers demand. Customers are interacting with services and products in new ways, and facilitating accessibility is key to continue growth. Innovation has paved the way for multiple platforms to expand the insurance market offer. For example, customers can now take out a policy directly via a web portal, manage their car insurance through mobile phone apps or apply for life insurance online. All these innovations have enabled the industry to improve the service experience and speed up underwriting and customer identification processes. Tech innovation should eventually allow the insurance industry to expand into new spheres with the use of blockchain technology.
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