Redistribution of Risk: Advantages for the Entire SectorWed, 09/05/2018 - 12:33
Q: What role does SCOR play in the insurance ecosystem?
A: Reinsurance allows insurers to protect themselves from volatility and better manage their capital. As a reinsurer, SCOR works with the main insurance companies in the country. Each company specifies the level of risk they are willing to assume. For example, in the healthcare sector a company will take into account their risk appetite and capital requirement, among other factors, to determine the specific monetary value they are willing to cover in case of an incident and reinsure the rest.
Q: Mexico had 239 foreign reinsurance companies registered in the country by March 2018. What sets SCOR apart from those others?
A: SCOR is a global leading reinsurer with more than 4,000 clients served by 38 offices around the world. We can offer clients many added value products and services that allow companies to better define their own offering or generate new alternatives.
The Mexican market is very well capitalized, which allows insurance companies to take more risks. Our strategy for Mexico is to meet local insurers’ demands for risk management and offer them value-added products that generate more business.
Q: Considering Mexico’s low private medical insurance penetration, what makes the country an attractive market for reinsurance?
A: Mexico’s private healthcare market remains small in terms of insurance coverage. The country has 120 million inhabitants but there are only 10 million people covered by health policies. Private health insurance remains expensive for many, so the sector is looking for alternatives to reach a larger segment of the population through the generation of more accessible products.
Total private insurance represents around 2.1 percent of the country’s GDP, while personal health insurance accounts for less than 1 percent. There is a lot of work to be done and as reinsurers we can offer significant added value by improving existing products or creating additional ones. One alternative is the indemnity products, which pay monetary amounts to the insured or beneficiary in case of suffering a serious health condition or hospitalization. These products are not new, but have seen little penetration in Mexico.
Another strategy is to improve the coverage of existing policies. The sector could also introduce products aimed at older people, such as long-term care policies that cover costs related to services for a population not able to perform activities of daily living. In these cases, the insurance would pay a previously stipulated amount that the insured can use to hire a nurse or to pay a retirement home, among other services.
Q: What measures can the insurance sector implement to increase coverage?
A: Access to health policies in the market is limited due to the high cost of current products. Mexico has more than 30 companies that offer medical insurance, which compete with each other mainly in terms of price. This reduces their margins. To address this issue, insurers are doing everything possible to control costs by negotiating with suppliers. In my opinion, the insurers’ product offer could be reshaped through the generation of substitutes or complements of the main existing health insurance products.
Q: What role should public institutions and governments have in increasing coverage?
A: Public institutions and governments are doing their part by offering coverage to affiliates of social security institutions and the Seguro Popular, However, a significant proportion of the population does not have access to quality services. Besides improving their own schemes, it is desirable that governments allow private companies to provide services on basic coverage but also on complementary or alternative protection schemes.