Time to Strike the Latin American Insurance Boom

Nov 13, 12 Time to Strike the Latin American Insurance Boom

Insurance stands amid the numerous thriving industries in Latin America—and not just that kidnap ransom kind, but every kind of insurance. Liberty Mutual began Latin American insurance efforts in 1995, and Latin American countries have an opportunity for more competitors.

The Latin American insurance market can be broken down into two basics categories: life and non-life insurance.  Non-life insurance, which covers almost all aspects of the insurance policies holders’ lives—i.e. automobile, health, personal accident, etc. – is on the rise in Latin America. According to the Center for Puerto Rican Studies at CUNY, non-life insurance is growing fast due to an increase in registered vehicles and workers compensation in various Latin American countries.2

Lack of knowledge of the Latin American market and questioning how long the boom will last presents an unnecessary deterrent for insurance companies who may investigate venturing into the Latin American market. In reality, the increase in non-life insurance in recent years highlights Latin America is changing, arguable for the better, and now is the time for Insurance companies to consider building business in these countries.

Florian Kummer said in an interview with BestDay audio, “lines like liability [open up] as societies mature and as societies become much more middle class than before.”3 Latin American companies and their populations are, as Kummer says, “maturing” in a manner that requires more insurance policies.

Frost and Sullivan report “the future consumer marker of Latin America is projected to be 665 million people with a combined GDP of $6.8 trillion in 2020.”4 In other words, the insurance market will continue to grow in Latin America as more and more middle class members arise and purchase cars, homes, and other goods which must be insured. Frost and Sullivan also assert “[the middle class] will account for around 43% of the region’s total population by 2020; consequently, the expenditure from this segment is also expected to increase by 51% in 2020.”4 Therefore, Latin America has developed a huge, and lasting, need for insurance companies.

“Like anyone else, Latin American’s don’t want to foot the bill for a fender bender on the family car, and they are able and willing to purchase all kinds of insurance to protect their hard earned assets,” says George L. San Jose, president and chief creative officer at The San Jose Group. “Insurance companies have a great opportunity to expand business to Latin America and take part of their thriving GDP.”

Countries with significant insurance growth are highlighted below:

Argentina: Major vehicle consumption has sparked a positive rise in non-life insurance policies. Occupational hazards insurance also increases as wage conditions improve and higher rates on policies are implemented. Vehicle and occupational hazard insurance account for 70% of Argentina’s non-life insurance business. With a low unemployment rate, a flourishing middle class and with no single insurance company currently holding more than 10% of the market share, Argentina is an optimal country for American insurers to take their business.5
Population: 40.7 million
GDP: $364 million
Premium Volume: Total $10.1 billion ($1.9 billion Life, 8.2 billion Non-Life)
Insurance Penetration (Premium as % of GDP): Total 2.8% (0.5% Life, 2.2% Non-Life5

Brazil: As the largest insurance market in Latin America, Brazil is expected to continue growing as they’ve moved into the second phase of their growth acceleration program. The “Vida Gerador de Beneficio Livre” (VGBL), unique to Brazil, dominantly accounts for their insurance market success. VGBL works as a private pension fund designed to gain capital to prepare a solid and secure succession plan for family members left behind. With VGBL, the option to receive monthly payments or receive a full pay out at any given time, tax free, always remains. VGBL has increased by 21.8% over the past three years.6
Population: 203.4 million
GDP: $2.09 trillion
Premium Volume: Total $64.1 billion (Life $33.2 billion, Non-Life $30.9 billion)
Insurance Penetration (Premium as % of GDP): Total 3.1% (1.6% Life, 1.5% Non-Life)6

Chile: Both life and non-life insurance are thriving. Premium life insurance experienced a growth rate of 1.8% in 2009. Despite a non-life insurance loss of 1.6% that same year, Chile’s insurance market has risen over 15% in both categories since then. Currently, Chile has the highest insurance penetration rate in Latin America—solidifying the county as a top target for insurance companies. Insurance is predicted to continue developing on the personal, vs. corporate, level.7
Population: 17.2 million
GDP: $207 billion
Premium Volume: Total $8.3 billion ($5 billion Life, $3.3 billion Non-Life)
Insurance Penetration (Premium as %of GDP): Total 4.1% (2.7% Life, 1.4% Non-Life)7

Peru: In 2009, the country’s GDP grew to a tremendous 8.8 from a 0.9. This exponential economic growth led to major increases in the volume of life insurance purchases. Peru currently holds the largest increase of insurance growth among all other Latin American countries. The forecasted increase in personal insurance lines open the potential for more competition in Peru’s insurance segment.8
Population: 30 million
GDP: $ 5.7 billion
Insurance Penetration (as % of GDP): 2.5%8

In all, the question is not if Latin Americans will need insurance, but who will provide it to them. Insurance companies must consider targeting these countries’ flourishing middle class markets for new sources of revenue as well as potential profit, market and client growth.

Sources:
1. Liberty Mutual Insurance. (2012). “Country Operations.” Retrieved from http://www.libertymutual
group.com/omapps/ContentServer?pagename=LMGroup/Views/LMG&ft=3&fid=1138356720016.

2. “The Latin American Insurance Market in 2010-2011.” (n.d.) Centro de Estudios and FundaciÓn Mapfre. Retrieved from http://www.mapfre.com/fundacion/html/revistas/gerencia/n112/en/
informe1.html.

3. McDonald, Lee. (2012, June 1). “BestDay Audio Features Interview with Liberty Syndicate’s Florian Kummer: Latin America Insurance is more than Growth.” A.M. Best Company, Inc. Retrieved from http://www3.ambest.com/frames/frameserver.asp?site=press&tab=1&altsrc=14&altnum=&refnum=66496956835384486852.

4. Isla, Lorena. (2012, May 17). “Mega Trends Underlying Latin America’s Future Growth – Macro to Micro Implications.” Frost and Sullivan. Retrieved from http://www.frost.com/sublib/display-market-insight-top.do?id=260399597.

5. Andrew, Amy. (n.d.) “Argentina: Room to Grow.” Liberty Mutual Group.

6. Hawthorne, Shannon. (n.d.) “Brazil: The Sky’s the Limit.” Liberty Mutual Group.

7. Hawthorne, Shannon. (n.d.) “Chile: Leader of the Pack.” Liberty Mutual Group. Retrieved from http://www.libertymutualgroup.com/omapps/ContentServer?fattribute=cms_attribute&c=cms_document&pagename=LMGNews%2Fcms_document%2FShowDoc&fnameprefix=cms&cid=1240005981758

8. Slavin, Al. (2012, September 3). “Opportunities Taking Shape in Peru’s Maturing Market.” Best’s Special Report, A.M. Best Company, Inc. Retrieved from http://www.ambest.com/press/090703peruspecialreport.pdf

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