In Latin America, life insurance is frequently purchased from banks rather than from traditional life insurance agents.
This wasn’t the first time I heard about this, but it was the first time I’ve heard it firsthand from experts in those markets.
Last week, I had the opportunity to participate in an international life insurance conference hosted by Fasecolda, the Colombian federation of life insurers, in Bogota, Colombia, where many of my fellow speakers were actuaries who spoke about challenges and trends in countries such as Mexico, Brazil, Chile, Peru and of course, Colombia.
The conference was presented via live translators in Spanish and English. (Note to self: Next time you are presenting in front of a predominantly Spanish-speaking audience, it would be a good idea to have your PowerPoint slides translated into Spanish.)
Communication barriers notwithstanding, the conference, by design, had a decidedly international feel. The organizer wanted to bring the audience, consisting mainly of Colombian insurance executives, a sense of what is happening in some of the markets around them. Discussions also revolved around issues related to changes in consumer behavior and product distribution trends, with the goal of helping attendees identify innovative alternatives to reach more customers with the highest return.
While I was only able to attend a handful of the second-day sessions following my own (on challenges and opportunities in the U.S. individual life insurance market), I came away with an enhanced understanding of the way life insurance is being sold in Latin America.
The thing that struck me the most was just how big the bank insurance model, also known as bancassurance, is in the region.
In Brazil, around 80 percent of life insurance premiums are secured through the bancassurance channel. Over half of Chile’s banking institutions promote some form of life insurance, and 44 percent of Colombia’s banking institutions promote some form of risk life insurance. Banks are estimated to account for 15 percent of life insurance premiums in Colombia.
Around half of Mexico’s banking institutions promote some form of life insurance, and life insurance grew at an annual rate of 10 percent between 2008 and 2012 in the country. Mexican life insurance distribution in 2012 can be broken down as 33 percent traditional agent, 41 percent bancassurance and 26 percent payroll deduction, according to one of the speakers.
Risk life insurance is commonly offered by Peru’s larger banking institutions, and credit unions in Peru are particularly strong in the distribution of microinsurance.
Ernst & Young’s “2013 Latin America Insurance Outlook” says the region is poised for growth. In addition to economic expansion, opportunities exist for insurers to improve chronically low market penetration rates by tapping the growing middle classes.