Health Insurance Portfolio Sees Double Digit GrowthSat, 09/05/2015 - 20:20
Q: Having worked for 30 years in the insurance sector, how would you characterize the evolution of the Mexican market?
A: The Mexican insurance market has become more complex in a variety of ways: the largest insurers worldwide are entering the market, creating new trends, and introducing international best practices. This makes the local market more competitive yet more saturated, with local insurance companies having to work harder to compete with the newcomers. Another factor affecting the insurance market is the introduction of new technologies, allowing consumers to be better informed about available products and push insurance companies to improve services. Technologies are becoming more sophisticated and there is a worldwide initiative to adopt risk-based capital approaches to improve corporate governance. In addition, new insurance regulations were implemented in April 2015. These regulations explain the basic procedures necessary to implement the risk-based capital approach in Mexico. While similar systems are already implemented worldwide, Mexico will be the first country in Latin America to implement this model for the insurance sector.
Q: What measures is Seguros Multiva taking to differentiate itself in this increasingly competitive market?
A: While each company is different and has its own competitive advantages, Seguros Multiva has the advantage of being a Mexican company that belongs to Grupo Empresarial Ángeles and Grupo Financiero Multiva, both of which support our growth. Seguros Multiva has many different business lines, but we are placing a particular focus on health. Last year, more than half of our premiums came from the health sector, and this should grow to 70% in 2015. Grupo Empresarial Ángeles has been instrumental to our growth, as we provide health insurance for all its groups, including Grupo Financiero Multiva, Hospitales Ángeles, Camino Real, and Imagen. We are also working with several government organizations, such as the UNAM, while seeking to build up our presence outside of Mexico City.
Q: How is the insurance sector reacting to Mexico’s aging population and the increase in chronic diseases?
A: The situation regarding chronic diseases is strongly related to education and socioeconomic levels, since most of the people suffering from these diseases are unaware of how to prevent them or of how to seek insurance services. Research into Mexico’s epidemiological profile indicates that most patients who suffer from these diseases are uninsured. While this is prevalent in Mexico, it has not yet affected the insurance industry, as we have not perceived a substantial increase in the number of claims related to chronic diseases. Based on the experiences of foreign insurance companies, we are planning to launch a product focused on these specific diseases. This can be complicated because we want to provide the best quality service to this segment of the population, while, on the other hand, providing coverage for already obese or diabetic people could pose a problem for insurance companies. The very nature of insurance is that it works by collecting small payments from a wider number of people to cover the large costs of a limited number of medical conditions. The best policy for a health insurer is to acquire as many customers with as few health issues as possible to enable it to properly cover the medical needs of very sick customers. For that reason the increasing number of people who are sick will negatively impact our currently healthy customers. By opening the door to include people with chronic diseases, we will have to increase our prices. We have to find the right balance in order to be able to offer a competitive product for healthy people and those with chronic diseases.
Q: Do you foresee health insurance coverage improving in Mexico?
A: There is a poor insurance culture in Mexico, as 50% of healthcare expenditure is paid out of pocket. However, we are seeing increasing demand for health insurance products from the general public. Most Mexicans use public services when they have a medical need, but they are becoming increasingly aware that social security might not be able to satisfy all their requirements and therefore are considering alternatives to complement their coverage. We are also seeing increased demand as healthcare costs are rising and more people are realizing that they will need insurance at some point in their lives to be able to afford the best medical services.
Q: How will the recent changes in the legal framework impact your business?
A: We expect that this reform will drive the entire industry toward a higher degree of professionalization and more corporate governance. This reform will encourage the sector to be more careful about the risks that it is underwriting, which will be positive for the whole sector. In the long term, the new regulations will push us towards innovation and efficiency, even though the learning curve will have an initial cost. Implementing said regulation will be expensive, as we will require more actuaries and new employees, as well as the improvement of our IT infrastructure and acquisition of new systems in order to produce the information required by the regulator.
The initial increase in our expenses will impact our business and all others in the industry, which subsequently will have an effect on insurance prices. Therefore, this reform will negatively impact the immediate growth of the insurance industry, as new companies may have trouble starting up and smaller companies will not be able to afford the new regulatory requirements. However, some experts claim that the industry will be consolidated by 2017. While it may be necessary for us to pass the cost of implementing this new regulation onto our customers, we must be conscious of maintaining a competitive advantage now that the market is becoming more competitive.
Q: How will your expansion manifest itself in 2015?
A: Seguros Multiva currently has health insurance policies for around 45,000 people. We are a small insurance company but we are growing rapidly. In 2014, the company grew by 30% overall, but our health area grew by 50%. We expect similar growth for 2015, both in individual clients and corporate insurance. It will become increasingly difficult to continue to grow at this rate but we expect to be able to maintain double-digit growth for the next few years. Our rate of expansion is much larger than that of most insurance companies as the entire insurance industry grew by about 3% in 2014 in Mexico. We opened three new branches last year in Puebla, Queretaro, and Leon in order to provide more comprehensive services to our clients for health, automotive, and other types of insurance. We will continue expanding to the rest of Mexico, given the many areas where we do not have offices. We want to take full advantage of the Grupo Ángeles network to fulfill our potential. Our main priority for 2015 is to fully comply with new regulations, the second is to sustain our growth rate, and the third to improve our services for insurance holders and insurance agents. To do so we are working on several initiatives to improve our IT platforms, to make our products more competitive, and to ensure they comply with our clients’ needs. We are also promoting several initiatives to improve working conditions for our most valued capital: our employees.