Over the past few years Chile’s insurance market has grown faster than that of any other country in Latin America, and it’s current growth rate is almost double that of its GDP – that’s predicted to increase further in the future as its population ages and attitudes continue to evolve. With those changes come challenges, however, and that’s something the country’s financial companies have to recognise and adapt to.
One of the country’s leading life insurance firms CorpVida has been privy to that growth, developing significantly since its founding over 20 years ago through community involvement, corporate responsibility and a customer-focused vision. CorpVida’s General Manager Christian Abello spoke to World Finance about Chile’s life insurance market and how the company is stepping up to the challenges while helping the wider community.
How has the life insurance market in Chile grown over the last few years?
The life insurance industry has been growing at a much faster rate than the country’s economy in recent years. We believe this will continue over the next five to 10 years given that incomes have now increased and people are becoming more aware of the need to protect incomes and secure a successful retirement.
Chile has the highest penetration of insurance premiums in the region (4.2 percent, compared with a Latin American average of 2.8 percent). It has a per capita premium of almost $700 – significantly higher than the regional average of $300. We believe there is still space for further development however, given that premium levels per capita in Europe and the US are between three and eight times higher than here. Chile’s large number of insurance companies suggests a promising future.
40%
Growth in CorpVida market share in five years
Has CorpVida’s performance been in line with that of the market or exceeded it?
Our performance has been in line with what has happened in the market. In recent years we’ve had consistent growth in life insurance, traditional products and retirement funds. We have achieved almost 40 percent growth in our market share over the last five years.
In terms of retirement annuities we continue to occupy a leading position, with a market share of almost 15 percent, which puts us among the three biggest companies in the country for that sector. We are the largest firm in terms of pensions paid, serving more than 90,000 people.
With around 270,000 customers and branches throughout Chile, our main mission has been to ensure a secure future for people – we’re achieving that promise through commitment, professionalism and a highly qualified and motivated workforce which delivers excellence in providing advice, services and solutions to customers.
What opportunities are there in Chile for the insurance market?
We hope to expand the market in Chile and to reach different segments of the population through affordable insurance plans. It’s also important to introduce new incentives to encourage people to save in preparation for their retirement, for example by creating group saving plans for employers.
How much further development does Chile require in order to catch up with developed markets?
We have encouraged regulatory changes to modernise and further strengthen CorpVida. We are actively involved with the risk-based capital (CBR) approach, which allows asset and insurance risks to be managed effectively – providing reassurance to shareholders, policyholders, regulatory authorities and the community.
The insurance industry accounts for the second largest institutional investor in Chile’s financial sector, so as a country and industry we are constantly developing solutions to leverage financial instruments. Local rules and regulations help us to do that.
What challenges does the industry face in the coming years?
The first challenge is the consumer; there has been a significant change in consumer behaviour and education, meaning they now demand better insurance services and more transparency. Insurers need to innovate in order to manage consumers’ financial risks and protect their quality of life. We believe technology will play a big role in the future with internet usage increasing, so we need to embrace that in order to improve our customer offering.
The second is regulation; Chile joined the OECD, which means increased regulation for the country’s financial sector – that’s had a strong impact on the insurance industry, and it’s likely to continue to have an effect in the future. A new trade act was introduced to provide consumers with more rights and to protect policyholders.
One of the biggest challenges the new regulatory environment entails is the need to monitor risk-based capital, which our head of securities and insurance is overseeing. We will follow international best practice guidelines to streamline our processes.
What impact will higher life expectancy have on the industry?
Our industry is heavily influenced by global economic trends. But there is another important factor influencing us, and that’s the country’s ageing population as life expectancy increases (see Fig. 1).
According to the Association of Insurers, there are currently 1.8 million people over the age of 60 living in Chile, and that’s expected to double by 2020, before reaching six million in 2050. The Annuities products we offer are therefore becoming increasingly appealing as they have a currency-indexed fixed income and therefore don’t entail the risks that pension funds do. We are committed to improving quality of life for those retired by helping people make informed decisions in preparation for their retirement.
How has CorpVida developed its culture of ethical responsibility over the past few years?
We’ve designed a vision of corporate sustainability and corporate social responsibility to strengthen the economic value of the business and contribute to social development. In so doing we aim to meet the expectations of shareholders, customers, employees and the local community.
Chile has the highest penetration of insurance premiums in the region
In the past three years we have worked on strengthening our corporate culture, focusing on transparency, commitment and accountability by establishing a set of values that are now recognised as being among the most important assets of the organisation. We have developed our training programmes at all levels of the business to secure a skilled team of ambassadors.
We are focused on developing people and their families by offering protection and savings solutions, and we do it in an ethical and transparent way. We have been involved with various outreach programmes, such as helping people with disabilities get into employment in the industry. We believe building policies around equality and diversity is incredibly important for the development of the country.
How is the company’s strategy helping the wider Chilean economy?
The insurance market relies heavily on the trust customers place in its long-term plans – acting ethically and responsibly is thereby of the utmost importance to us and we are committed to improving quality of life, not only for our customers but also for our employees and the community in general.
Our company is strongly committed to the creation of sustainable and long-term value for its stakeholders. For our shareholders we obtain financial value, strictly monitoring risks and maintaining our solvency and reputation to increase that value over time. For our customers we offer support at all stages of their lives, providing appropriate and timely advice and offering the highest standards in service. We take care of our staff and their development and contribute to the growth of the community.
We are focusing on international best practices through the aforementioned CBR. We believe the improved regulatory framework will help us and other key market players, reinforcing transparency and accountability in the industry as a whole and creating a sustainable balance between economic value and social value for our country.
What does the future hold for the firm?
We aim to continue to set the benchmark for the industry while remaining one of the country’s leading life insurance companies, offering innovative products and cultivating long-term, responsible relationships with our customers.
By focusing on creating a sustainable relationship with our customers and producing shared value we will continue to strengthen our sales and service models. Our new practices will continue to ensure we deliver professional advice based on real needs, offering solutions consistent with our promises – in so doing we aim to cultivate even stronger customer loyalty. We believe that embracing technology by offering online services will help us to increase customer satisfaction.
Our vision is not only to offer the best products, services and advice to clients, but also to ensure that our business model generates and adds value; value we share with our stakeholders. That for us defines sustainability in both the short and the long term, as we continue to work in harmony with the environment and with current and future generations.
