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Mexico Insurance Report Q1 2012
Business Monitor International, Nov 2011, Pages: 65
Business Monitor International's Mexico Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's insurance industry.
- On balance, Mexico’s proximity to the US is a challenge rather than an opportunity for its insurance sector, as well as financial services more generally. The larger companies, some of which are affiliates of major multinational banks or insurance companies, are essentially in competition with rivals to the north of the border.
- Insurance is not embedded as an important financial product for the majority of the Mexican population which has impeded its growth. This is further compounded by a structural weakness whereby too many households do not have the resources to consider any form of organised savings. Recent months have seen a rise in advertising and publicity campaigns to increase the awareness of the benefits of insurance.
- Changes in the competitive landscape appear to be driven mainly by how various protagonists see opportunities across Latin America in general rather than in Mexico in particular. The strategic distribution partnership between Santander and Zurich across the region is an example of this, and large multi-national groups are playing an increasingly dominant role which may serve to alter the lack of pricing power that has previously characterised the Mexican insurance competitive landscape.
At first glance, the absolute size of Mexico’s insurance sector might indicate that it is an attractive commercial opportunity. However, a comparison with its counterpart in Brazil is revealing. Brazil’s population is about 75% larger than that of Mexico. However, in terms of gross premiums in 2011, Brazil’s life segment is about four-times the size of that of Mexico. When health insurance premiums are included (as they are by BMI), the Brazilian non-life segment is by that metric about seven-times the size of that of Mexico. BMI continues to think Mexico’s insurers are constrained by a number of structural challenges – such as a high percentage of households who cannot afford any form of insurance. However, the more fundamental problem is competition.
In the non-life segment, competition is reflected in the lack of pricing power that has meant it has been difficult for the main companies to achieve premium growth in excess of nominal GDP growth. In good years, penetration has tracked sideways at low levels. In bad years, it has gone backwards. However, this trend is seeing the first signs of reversal, with CNNExpansión reporting that research by Seguros Moterrey could see penetration rising to 4% of GDP by 2010. In the past 11 years, penetration has increased marginally, with BMI forecasting for overall penetration to track sideways remaining at 1.7% by 2016.
Nevertheless, with the Mexican economic picture still looking strong, BMI sees steady growth in the Mexican insurance sector with key opportunities being presented through product and distribution innovation, particularly where technological synergies have the potential to be exploited.
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