Article Synopsis :
Powerful forces are driving trends in the insurance market within Brazil.
Interest rate and exchange rate volatility is limiting growth while inflation and unemployment continue to creep up.
Regulation is upping the ante
The industry is facing new pressures from IFRS17, risk based capital requirements for health insurance, public pension reforms and within a context of inefficient legacy systems.
The market is ripe for digital transformation, as almost half (45.6%) the population now uses a smartphone and has embraced digital channels.
And there is plenty of opportunity. Life has only a 2.1% market penetration, while non life is as low as 1.8%.
The digital roadmap
Customer centricity must therefore be a priority, but business models need to be optimised if this is to be possible.
The number of insurtechs that have launched in Brazil in order to service this demand has increased five fold over the past three years.
While insurers are seeking to expand their digital reach, the broker channel remains dominant in P&C. Trust is high among consumers, yet loyalty is easily swayed based on more attractive charges, terms and policy features.
Disruption may come from pay per use insurance, as alternative digital channels are likely to attract consumers. Motor, extended warranty and commercial are the three primary products. Technology is transforming motor which is highly competitive, while high retail commissions are leading to some players leaving the warranty market. Commercial, particularly or SMEs looks strong for growth.
A new approach
In order to make the most of digital transformation, insurers are looking to innovate in the non-life sector, particularly in connected insurance in motor, home and health.
On demand affinity insurance offers potential for limited duration cover products and the formation of risk pools through peer to peer insurance.
Bancassurance dominates the distribution of savings products, but digital channels are emerging. The individual life risk market has grown 19% in the past three years, while credit Life has grown by 10%.
The path to success
Insurers in Brazil must transform their businesses if they are to succeed in these areas.
Digital transformation must be embraced and implemented as a source of both cost reduction and driving growth.
Legacy systems and processes must be left behind if data quality is to be improved to increase analytics and reduce costs.
Finally, they must focus on new products that customers really want and make them available through their preferred channels, i.e. digital.
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Digital Insurer's CommentsBrazil is experiencing the same demands that come from a consumer base that has adopted digital devices and likes the immediacy and personalisation they offer.
Insurers will have to navigate the choppy waters of regulation and the volatile macroeconomic environment.
But even here, great opportunities exist to expand their reach and increase penetration in a largely uncovered market.
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