In the previous article, we left you a question on the air, and now we will answer everything that has to do with it. Why is life and non-life insurance still rare in Latin America? We will tell you in detail below:
- Low financial inclusion makes insurance less accessible:
It is known that less than 50% of Latin Americans have access to traditional financial services, including insurance policies, since they, especially in the Life category, are distributed by banks and other financial institutions, the same pattern of exclusion tends to follow both finance and insurance in the region.
In the case of Brazil, it is a country with an exception to this rule, since banks play an indispensable role in the distribution of life insurance policies.
Chile’s public-private health system also helps ease some challenges related to health insurance distribution in a region with low financial inclusion. However, this regional exclusion of financial products continues to contribute to the slowdown in the local insurance market.
2. Technology has been slow to be used:
The vast majority of insurers in Latin America today rely on rudimentary risk calculation methods to set the price of insurance plans. While for now there are three companies covering 42% of the regional life insurance market, there is still an ideal space to innovate in the non-life category and new companies are beginning to reinforce existing insurers with new technology to improve. risk calculations and customer experience.
These same companies have been collaborating to develop digital channels to reach the growing middle class. Startups are using new technologies not only to reach customers, but also to calculate risk more accurately and to provide insurance that rewards good behavior for incentives.
The Innovation within the insurance industry has been a challenge and insurtech have played a very important role in intervening during this process, as they have collaborated with the traditional market to make it possible for premiums to be more accessible to clients and more accurate for providers.
3. The growth of insurance products continues to seek to reach the new middle class:
In the last 10 years, the middle class in Latin America has increased by 50% and currently represents 30% of the population. Many of these young professionals come from families that struggled to meet their basic needs such as health, nutrition and education, so insurance products often seem «intangible» when daily challenges are most urgent.
There is an imperative need to change the perception of insurance products from a cost «in case something happens», to something more tangible, with its implications and daily updates, in addition to just hearing from an insurer and when something bad happens like an illness or accident.
As more insurance companies allow them to partner with startups to obtain technologies such as the Internet of Things (ioT) or Artificial Intelligence (AI), they could become more tangible, attractive and achievable for more people. An insured population is less vulnerable to unexpected events, which promotes local economic stability in the long term. As the insurance market in Latin America becomes more modern and technological, they can help the population stay out of poverty and insure those who have previously been excluded by the traditional system.