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Brazil Insurance Prospects Bright

Posted on Mar 13, 2012 by Sergio Ulloa ()

Brazil's insurance industry is expected to see strong growth momentum across all health, general and life insurance business lines over the next four years, according to new research from emerging markets consulting firm BRICdata. In 'Business and Investment Opportunity in the Brazilian Health Insurance Industry: Analyses and Forecasts to 2016,' Bricdata explains how Brazil's person accident and health insurance market has been able to post robust growth rates over the past decade due to the South American country's continued economic development, increased penetration and development of medical insurance products, rising disposable income levels and an overall better consumer awareness of the need for better healthcare, protection and savings services. This increase in sales has been matched by higher than average premium retention levels, as more Brazilian companies look to provide health insurance as a prerequisite employee benefit. During the report's five-year review period, Bricdata noted that the value of the Brazilian health insurance industry rose from BRL9.8 billion (US$5.47 billion) in 2007 to BRL15.1 billion ($8.43 billion) in 2011, recording a remarkable double-digit compound annual growth rate (CAGR) of 11.27 percent. The overall penetration of health insurance products and services in Brazil meanwhile grew from 0.34 percent to 0.54 percent over the same review period, as many new policies were sold across the expansive Latin American country. According to Bricdata, the number of new insurance policies sold within this sector increased in value from BRL69.14 million (US$38.62 million) in 2007 to BRL88.42 million (US$49.39 million) in 2011. Using this data and taking into account other market factors, BRICdata has forecast Brazil's accident and health insurance market to expand by a CAGR of 6.32 percent over the next four years to reach a projected value of BRL16.2 billion (US$9.05 billion) by 2016. In accordance with this scenario, the UK-based research firm expect the number of new health insurance policies sold in Brazil to rise from around BRL95.66 million (US$53.44 million) in premiums in 2012 to over BRL116.34 million (US$64.99 million) by 2016, with sales of group policies increasing their market share the most over the forecast period. These figures would certainly place the country amongst the world's largest insurance markets. Bricdata's report acknowledges however that Brazil's health insurance industry still needs to adjust to pervasive market issues in order to better capitalize on the country's strong growth momentum. One of the key challenges Bricdata mentions is the difficulty local insurers are now having in financing health insurance claims due principally to the rise in cost of medical treatment across Brazil. Domestic healthcare expenses have spiked in recent years, both in line with rising global medical inflation and the emerging demands of Brazilian policyholders for the latest and best medical treatment and technology available. The Brazilian government's chief health insurance oversight body, Agência Nacional de Saúde Suplementar (ANS), has stepped in to address some of these issues, introducing several regulations over the past few years, which aim to establish market-wide disclosure norms, medical insurance pricing rules and increasing health insurer accountability overall. Whether any these moves can effectively mediate costs for both policyholders and providers in Brazil remains to be seen, but it is surely an encouraging step. The country's insurance market also faces noted structural challenges. The Brazilian health insurance sector at present is dominated by large public insurers. The report notes that the market remains highly concentrated with the country's top 8 insurers accounting for almost 70 percent of total retained health insurance premiums in 2011. Smaller private-sector health insurance companies haven't proven able to generate the necessary scale to succeed as of late and have further struggled due to capital constraints and increased pricing competition. Thus, to improve upon their competitive position in the local market, Bricdata notes that many of the country's smaller health insurers are now looking to foreign investment and joint-venture partnerships with prominent overseas insurance groups to succeed going forward. Bricdata found comparable growth prospects and concerns amongst Brazil's general insurance market players in a separate report released earlier in the year, titled Non-Life Insurance in Brazil, Key Trends and Opportunities to 2015. According to the report, Brazil's non-life market has been able to deliver healthy growth over the past decade thanks to the country's strong economic development, the expansion of broker channels and the rise of motor, property and construction insurance lines. Despite this marked increase in capacity over the past decade however, the industry faces serious issues going forward, including low efficiency, poor underwriting discipline and false regulatory barriers to market competition. This last issue is particularly pertinent as Brazil's regulatory environment is only expected to get worse for private insurers over the short term following new proposals by the Superintendência de Seguros Privados (SUSEP) to implement a tighter risk-based supervisory regime complete with a contentious local reinsurance mandate. Another key challenge for the industry going forward are of course the ongoing European debt crisis and fears of recession in the US, which could adversely impact Brazil's economy and industry projections. In another report, 'Life Insurance in Brazil, Key Trends and Opportunities to 2015,' Bricdata analyzed the Brazilian life market, which is forecast to reach BRL98.8 billion (US$56.4 billion) in premium income by 2015, up from BRL61.3 billion (USD35.0 billion) in 2011 at around a 12.3 percent annual growth rate. Bricdata cites Brazil's strong macroeconomic and microeconomic fundamentals, partial relaxation of regulatory restrictions, foreign insurer market entrants and increased awareness of the need for insurance, especially amongst the younger generation, as the primary growth drivers pushing the Brazilian life industry so far. Going forward, the research firm expects sales of deferred annuity products for individual policyholders to play a more prominent role for life insurers, in addition to bancasurance development, as more of the Brazilian population gains access to more formal banking channels. Brazil is now the largest insurance market in Latin America and ranks 17th largest in the world overall, according to Bricdata. This has occurred despite around 70 percent of the country's employed population remaining uninsured, and thus presents a huge opportunity for both local and international insurance companies. Overall Brazil looks set to continue being one of the fastest growing insurance markets over the next decade, with rising income levels and consumer awareness of risk management expected to drive a considerable demand for coverage solutions nationwide. Furthermore, Brazilian insurers could yet make a significant mark and compete on the global stage if they are able to refine their business models and capitalize on the tremendous potential available in their home insurance market. Companies Mentioned BRICdata Bricdata BRICdata publish in-depth strategic intelligence on emerging markets designed to help clients better understand better identify, understand and pursue growth opportunities in these regions. The company is headquartered in London and covers a broad range of industry sectors, including consumer, financial services, insurance, telecoms, construction and more.
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