The challenge of increasing sales of personal lines insurance products

27 December 2015

José Ramón Mariátegui.
Presidente Ejecutivo de Mariátegui JLT.

Many political parties are evaluating the needs of the majorities in order to prepare their electoral offering. One of these needs is that most oft the population is defenceless in Peru due to poor private and government coverage.

As a person with more than 40 years of insurance experience I could not agree more. A well protected nation is a characteristic of a developed country and that is the vision we should have.

The insurance industry must carry out self-criticism in the reason why so little progress has been made in recent years.

Peru has an insurance penetration index in GDP of 1.8%, one of the lowest rates in Latin America, versus Chile of 4.2%. This is one of the biggest frustrations of our industry.

What are the reasons for this limited scope?

Insurance products for individuals remain cumbersome with numerous exclusions. For example, a basic vehicle policy has over 35 exclusions. That's a shame.

As such is the case, today, there are more than 2,500 insurance claims in Indecopi received from November 2014 to October 2015 which are expected to be heard.

The insurance system would have much to learn from the pharmaceutical market. For their drug advertisements, they are required to inform customers about side effects.

It must also be applicable for insurance advertising. This would remove the bad reputation on insurance caused by the fine print.

The two main distribution channels are insurance brokers with 60% and non-traditional channels dominated by banks and department stores.

In Peru, there are fewer than a thousand brokers between legal and natural persons. That is to say, there is an insurance agent for every 30,000 inhabitants, which renders the adequate dissemination impossible. While Chile has almost 2,500 insurance brokers, with a population of just 16 million.

Nevertheless, difficulties and tests required by SBS to be admitted to the degree of Insurance Broker are enormous. This does not help to distribute.

Another reason is the low banking services in our country due to the high level of informality, which is only 28% compared with Chile that has more than 70%.

With that being said, do we really need presidential candidates to support these initiatives? I do not think so. The ideas exist and depend on us to execute them.