The second-largest market in Latin America

Mexico is the second-largest insurance market in Latin America after Brazil. At the end of 2010, both life and non-life insurance segments witnessed a significant rise in premiums. Many segments under non-life insurance sector experienced a real annual increase in direct premiums as compared to 2009 such as fire, earthquake, liability, maritime and transport, credit, and agricultural.

The insurance sector is well developed, with five firms (three of which are foreign-owned) accounting for nearly 60% of policies. A clear sign of the sector’s strength is its resilience during the financial downturn. Indeed, not one single insurance company in Mexico went bankrupt or required assistance from the government. The regulations implemented by the sector’s authorities have favored investment, as well, resulting in investors taking a long-term interest in the market rather than a speculative one.

Despite the insurance industry’s stability and attractiveness to investors, it still represents a small overall economic activity, contributing less than 2% to GDP (compared to 9% in the U.S.). According to AMIS, the Mexican Association of Insurance Companies, in 2009 only 2.6% of Mexicans had health insurance and 5% hold a house insurance policy.

Low penetration rates mean big opportunities for existing insurance companies as well as for foreign investors. However, raising the number of clients must begin with education, as currently many Mexicans consider the service as an expense rather than as an investment.

The two major local players are Qualitas and GNP, who along with the other Mexican companies enjoy a combined market share of direct premiums that reaches 41%.

QUALITAS

Qualitas was established in 1993 to become the Mexican insurance specialist in the industry and has grown to be the market leader in the car insurance industry since 2007. According to Joaquin Brockman, managing director of Qualitas, “specialization is Qualitas’ main competitive advantage,” adding, “Another important factor to our success has been that the major shareholders in the company work, creating a stronger link with the day to day business.”

Qualitas has provided insurance to more than 1.6 million cars in Mexico and holds over 19% of market share. Additionally, in accordance with AMIS, Qualitas also supports compulsory car insurance.

“If someone has an accident, or injures someone, you can compensate for the damage with the insurance, which will certainly help to change this idea that when someone hits you, you think it's best to flee,” says Mr. Brockman. “Compulsory insurance will help improve the Mexican society in this regard.”   

To enter new niche markets, Qualitas is looking for new distribution channels and sales strategies. Mr. Brockman mentions opening other sales channels like department stores or supermarkets to reach more customers, even where there are no insurance agents.

Not only does Qualitas have an interest in serving the greater part of the population, but it also has a strong social responsibility policy. Under a social program called “Fomento Social”, it aims to hire those with disabilities as well as taking care of social development, where part of Qualitas’ proceeds go to social projects to help hospitals or the environment.

In recent years, Mexico has undergone major changes in its economy, due to growth, good performance of exports, good fiscal management, and increased foreign direct investment. Mexico has positioned itself as a chief player in the world market, and Qualitas plans to expand its business to Central and Latin America to extend its achievements in Mexico to familiar markets.

Mr. Brockman sees many advantages for Qualitas in this regard and predicts future success. “Mexico is well positioned geographically close to the world's most powerful economy, allowing us to have a big advantage, especially in manufacturing,” he says. “The government has done a great job of maintaining stable macroeconomic conditions, which is another advantage for Mexico.”

Mr. Brockman has also expressed interest in partnering with a U.S. company to strengthen and to help institutionalize the business for a faster pace of growth, as he believes that investment in Mexico and in the car insurance industry has the potential to be mutually advantageous. “Mexico is a great opportunity, because it is a country with great potential for growth and development. For example, if one examines the number of cars per person, we realize that the figure is still very low,” he says. “And moreover if you look at how many of these vehicles are insured, then we can see that there is a great business opportunity in the auto insurance industry.”

The managing director is satisfied with the success of Qualitas and is pleased to have helped build the brand to be synonymous with efficient costs and excellent services.

“I have seen the birth of an idea and have lived throughout the process until it has become a reality,” Mr. Brockman observes. “We’ve overcome many challenges, and we are now a well known company in Mexico and admired in many countries.”