The FINANCIAL -- There is a potential life insurance market of up to 90% of the populations in Latin American countries, according to Swiss Re’s Latin America Customer Survey Report 2013.
The report finds that the large gap between the perceived need for long-term care coverage and real insurance penetration of only 4% means that there is huge opportunity for insurers in the region. Brazil's low insurance penetration, and Mexico's perceived need for better serious illness covers are found to be specific growth opportunities.
Swiss Re’s survey, which examines responses from 5,001 individuals aged 21-70 in six Latin American countries (Brazil, Mexico, Chile, Colombia, Peru, and Puerto Rico), finds that insurance covers could often be more adequately tailored to address consumers' needs.
When asked what might motivate them to buy certain types of life insurance, respondents cited the need for health cover from a serious illness (38%), the affordability of long-term care (37%) and the fear of an unplanned drop in the standard of living (30%) as the most significant factors.
Key opportunities for insurers can be derived from these concerns. Despite the fact that long-term care is cited as a top area of concern, only 4% of consumers believe they have long-term care coverage. Similarly, the fear of suffering a serious illness ranks as the biggest concern amongst the public, but just 21% of consumers believe they hold the appropriate cover, according to Swiss Re’s Latin America Customer Survey Report 2013.
Respondents cited the internet and traditional distribution sources - such as agents and brokers - as the most commonly-used sources of information for insurance products and coverage.
Nearly half (45%) of survey respondents stated that they currently hold a traditional life insurance policy. The survey also found that those who need coverage the most are more likely to already have it. For example, 53% of adults aged from 35 to 54 years who have children hold a life insurance policy. Correlations reveal that people already holding policies are more likely to purchase additional cover, and that the number of policies held increases with age and income. Overall, men are more likely to hold policies, as well as to acquire additional coverage.
Penetration levels vary remarkably according to wealth. The penetration levels of three common insurance policies range between 23% to 30% for those in the highest wealth bracket; these levels fall to between 8% and 10% for people with the lowest incomes, according to Swiss Re’s Latin America Customer Survey Report 2013.
As with other markets, such as Europe, there is a general perception in Latin America that life insurance products are prohibitively expensive. The perception of affordability is the key barrier to taking out protection, but surprisingly, many consumers indicate that they would be willing to pay a considerably high monthly premium for life insurance coverage so long as the product contained simple terms and conditions.
This finding is a call to insurers to make products more accessible by simplifying product design and making products more understandable to consumers. It also suggests that consumers will be more likely to adopt products which have simple sales process and underwriting procedures.
However, one significant challenge for insurers is the significant percentage of the population who have simply not considered taking out an insurance policy, according to Swiss Re’s Latin America Customer Survey Report 2013.
Brazil has a considerable life protection gap on a country level. However the survey finds that Brazilians are the least concerned about their financial situation if they were to lose coverage. The coverage gap in Brazil is USD 2.5 trillion (USD 47,239 per capita), 44% of those surveyed in Brazil have no basic life and health insurance coverage and just 21% say they are reasonably positioned with adequate insurance.
The coverage gap in Mexico stands at USD 1 trillion, with the per capita gap (USD 39,242) being the lowest in Latin America and well below the region’s average of USD 60,628. In the survey, Mexico showed a high level of life insurance protection (48%), similar to other countries, according to Swiss Re’s Latin America Customer Survey Report 2013.
74% of the Mexican population feel vulnerable to the risks of physical illness, injury, disability, critical illness or healthcare treatment. Despite relatively high levels of life insurance protection, policies covering these additional risks are little-used in the market. Underscoring the need for enhanced awareness of life products, just 18% of respondents knew that critical illness cover existed.