As More Cars Are Financed, Insures See an OpportunityThu, 09/01/2016 - 14:19
There are about 35 million vehicles in Mexico’s vehicle park but only 28 percent of drivers are insured, according to Zurich Mexico. While the number is rising, it is still low and insurers like Zurich see an opportunity. “Europe and the US have more developed markets and there is not much room to grow,” says Antonio Borrajo, Head of Automotive Partnerships at Zurich Mexico. “But there is great potential in Mexico due to the low rate of insured drivers.”
Borrajo points out the country has a stable and expanding automotive industry and a growing carfinancing segment. During the first four months of 2016, 66 percent of cars sold were purchased through financing. “Seventy percent of the time the sale is through a brand lender, an increase on last year’s 65 percent. This is important for insurance firms as every car purchased though financing must be purchased with insurance,” he says.
Better payment schedules also have made it easier for Mexicans to buy a car. “Car loans are longer than they used to be. In the past most payment plans were 24 or 36 months,” Borrajo says. “Nowadays, payment plans can extend schedules to 48 and 60 months. This ensures drivers are covered for longer due to the insurance clause in their car loan.”
With 140 years of global experience and over 30 years in Mexico, Zurich is ranked among the top five insurance companies in the world. Its first Mexican office was opened in 1984 and it expanded and consolidated after the NAFTA Agreement came into force a decade later.
The company’s global footprint has been essential to winning new business and automotive companies are an important part of that, including in Mexico. “Our expertise and our distribution network play a key role in attracting new businesses as well as in retaining current clients,” says Borrajo. “On some occasions, we have won new automotive customers because the OEM had an existing relationship with the Zurich group in other parts of the world.” Ford Mexico is Zurich’s oldest partner here, but it operates with 17 different brands, attracting them with products designed for their specific needs.
The challenge for Zurich, Borrajo says, is to create a competitive product that addresses the requirements of its customers but also provides enough benefits for OEMs and financial enterprises. “Offering top quality services is our distinguishing characteristic,” he says. “We have to make sure all our collaborators understand our different products and the particularities each client might have through a shared information system.”
Borrajo says the best way to measure customer satisfaction is to look at an insurer’s retention rates. “Retention rates are improving due to the longer payment schedules of car loans than in the past. Renovations generate 65-70 percent client retention once people finish paying their credits.”
The principle of customer centricity is part of the Zurich Group’s core values. Client retention due to insurance renovation is the result of Zurich’s homogenous product portfolio combined with a quick response in case of accidents.
Zurich is also adapting new technologies. It provides car distributors with digital tools to facilitate insurance comparisons. Borrajo believes telematics are the most exciting opportunity ahead. The technology would enable Zurich to offer insurance policies that partly reflect the owner’s driving habits. “We want to move in this direction,” he says. “We predict that a time will come when the car is less important than the driver.”
The insurer is also reconsidering its role with selfdriving cars. “The principle behind self-driving cars is that technology will avoid cars having crashes but risks from flawed technology will always exist,” Borrajo says. “Insurers need to evolve to focus on technology rather than the car itself and Zurich will be prepared for that.”