Mexico’s insurance companies are undergoing rapid professionalization in response to stringent regulatory constraints. After a period of transformation, industry experts predict significant growth thanks to regional trends, greater efficiencies, and improvements in client education.
“Insurance is born of an agreement of trust between two parties,” says Fernando Eguiluz, CEO of Bancomer Insurance. Simplicity and transparency in policies are paramount to the success of the industry. He points out that insurance, unlike most other financial products, is not always an easy sell. “A banking product helps to solve an immediate need, while an insurance product addresses a future possibility.”
MAKING IT MODERN
Mexico is rapidly developing a sturdy middle class; even so, many of its citizens remain uninsured: insurance market penetration stands at around 2 percent of GDP. Naturally, insurance companies see this as an opportunity—insurance sector growth for 2017 is expected to be over 9 percent, while GDP will rise at a rate of 2 percent.
According to Carlos Latorre López, the CEO of insurer Prolomer Seguros, the insurance industry will reach 3.5 percent of GDP or more over the next 10 years. For the market to keep growing, he says, “We must continue demanding the modernization and restructuring of our laws and regulations in order to guarantee certainty and level the playing field for everyone.”
Many Mexican insurance companies are not capable of meeting basic reporting requirements. The adoption of Solvencia II will require a fundamental shift in the way many insurers do business—but after a period of adjustment, regulations should spur growth throughout the industry.