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South America International Medical Insurance market shuts down in 2012

Posted on Nov 27, 2012 by Sergio Ulloa ()  | Tags: Latin America, South America, south american health insurance

The distribution of offshore International health plans to wealthy individuals in South America has been a successful and lucrative market for many decades. IHI Denmark in particular, had built a considerable amount of its success in this part of the world over the years. In 2012 however, a combination of location regulation and poor plan performance has resulted in most key offshore providers pulling out of Latin America. Bupa and IHI Bupa, who had perhaps the biggest offshore portfolio in South America, have stopped selling offshore plans into the market. In 2004, Bupa took over the IHI portfolio after acquiring IHI Denmark. The insurer then went on to purchase US-based AMEDEX Insurance in 2005 which serviced 100,000 people in 42 countries throughout Latin America. Bupa are now looking to push the Latin American product range, citing reasons for the change being driven by compliance requirements. Several countries in Latin America have raised the stakes as international insurers are now exposed to draconian punitive fines for selling health policies within their country without a license. These potential fines are measured in sizeable percentages of global revenue. Bupa's response is understandable; as they try to fill the gap with onshore Bupa Latin America plans (Bupa LA is now available in Brazil once more). However, Globalsurance analysts believe that Bupa's offshore plans were better value for money, and that clients can now find deals from local onshore providers who have become competitive. That said, clients in the region are sensitive to branding, and the Bupa brand remains strong, thereby enabling it to access a large part of the market. Another key player in the market that gained traction through growth was Nordic. However, earlier this year, the company also decided to pull out of all new business in Latin America. Nordic will continue to honour the policies in force and the renewal of those policies, but will no longer accept new applications in the region. Nordic also pointed towards compliance as the reason behind the change. Allianz Worldwide Care has not been immune to these issues either. Although the insurer performed well in the market over the past 5 years, in 2012 they adopted a more selective manner when deciding which countries and nationals they would be prepared to offer coverage to. Specifically, Allianz no longer offers coverage to Brazilians in Brazil. However, Allianz have also developed plans specific for Latin America, namely the 'Allianz Global Pass' which is tailored towards its Latin American customers. Aetna, another major international insurance company, is continuing to perform well in the South American market with their onshore plan options (the insurer has mostly avoided offshore plans for the market). The brand is strong in the region and they have good direct billing capabilities; something highly valued by clients in South America. There are numerous international insurers who could potentially offer coverage to the market but Latin America nuances make it hard. For example, the market is very sensitive to brands, and clients often prefer references from family and friends before committing to a plan. Word of mouth and personal referral has always been important for the Latin American market, making it difficult for new entrants and those without a global presence. Since lower end local solutions were already widely available, offshore providers historically aimed at competing in very high end sectors (+USD 10k premiums). Only a limited number of international health insurance providers have the plans or the underwriting stomach to suit this sector; an area which can leave insurers open to very big claims (due to comprehensive policies). Outside the issues of increasing compliance (and the treat of punitive fines), the performance of Latin American plans have increasingly come under pressure as a result of several factors: the very high commissions paid to support the master agent-sub agent distribution channel, inflation in medical insurance treatment, exposure to the US medical costs (LA clients often travel to the US for treatment), and the increasing prevalence of fraud. Over the past few years, sophisticated and extensive fraudulent networks have been uncovered. These were more than just individual opportunists over inflating claims and elaborate networks were established involving fictitious clients, clinics, hospitals and doctors. Offshore insurers located on the other side of the world and unfamiliar with the language would be easy targets for these organizations. Globalsurance's assessment of the Latin American market for 2013 sees these trends continuing. Nannecy Dulin, of Globalsurance commented that, "The Latin American Region has certainly been a challenge in 2012 with many insurers withdrawing from the market or restricting access for certain clients or nationalities. We foresee more of the same next year and the region is going to increasingly require local onshore solutions and intermediary presence to be successful." The targeted sector of high net worth clients, with a sophisticated understanding of insurance (unlike China and India, where perhaps attitudes to insurance are more wary/sceptical), continues to grow but gaining access to these clients increasingly requires onshore solutions and a high brand value. Globalsurance predicts that sales of offshore plans into South America will further diminish in 2013 and a shift from 'international private medical insurance' towards 'local international private medical insurance' is likely to be the main reason behind this.
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