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M aking predictions about the future of a market is always a difficult and

risky task. I do not intend to do any exercise in futurology, but I shall tentatively reflect upon the key driv-ers that will shape the insurance in-dustry in Brazil in the coming years. Let’s proceed to the key trends:

tHe lOcus Of grOwtH and Optimism in tHe market Has permanently cHanged fOr tHe emerging ecOnOmies

The data for our economy con-tinue to point to a strong growth in the coming years, creating an ex-tremely optimistic scenario for the insurance market. The investment rate is growing and the credit is at record levels. The unemployment rate is the lowest in the IBGE series (6% in late 2010), establishing condi-tions for the corporate benefits mar-ket and for insurance in general.

trends and challenges

SaMY HaZan

Reflections on the Life and Private Pensions markets in 2011 and 2012

The Brazilian market for life insurance has drawn much atten-tion from foreign investors and in-surers in general. Brazil is finally ready to celebrate its entry into the group of the most developed and influential countries.

New foreign companies will enter the Brazilian market in the coming years, as a strategy to es-cape from economic stagnation in their countries of origin.

tHe new demOgrapHy Of BraZilBrazil is going through a tran-

sition now, which the vast majority of rich countries experienced in the past, the result of changes that be-gan six decades ago. In the 50s, the Brazilian population had high rates of growth, due to the combination of a high birth rate and reduction of infant mortality. The population grew at an average of 3% per year, rate which, in the following de-

cades, dropped to the current 1.4%. With the declining trend in fertil-ity, Brazil will achieve the maxi-mum of 264 million inhabitants in 2062, and thereafter the population will decline, according to IBGE. It is noteworthy that the current de-mographic situation in many de-veloped countries is that of popula-tion decline, a factor that limits the growth of the insurance market.

The increase in life expectan-cy has increased the percentage of adults and the elderly in our popu-lation. These demographic changes have altered the mix of insurance products in Brazil, which reflects the concerns of a generation with the problem of living for much longer: the highest proportion of insurance premiums for the seg-ment is going to retirement and benefit products in life, such as VGBL, insurance for disability and serious illness (which pays a benefit

Summary in english

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in life after the diagnosis of a seri-ous covered illness).

attracting new markets and tHe new prOfile Of tHe BraZilian cOnsumers

The middle class played a lead-ing role in the economy in recent years. Millions of Brazilians have taken advantage of the good mo-ment in the economy to experience, for the first time, the consumption of many goods and services, increasing the demand of products for protec-tion, such as funeral, credit life in-surance, loss of income (unemploy-ment), life and personal accident. The newest market that should arise, as the result of creating a mass mar-ket in Brazil, is that of popular insur-ance and microinsurance products.

Another segment that should attract the attention of many in-surers is the market geared to-wards women, whose presence in the labor market and as head of household is increasing.

cOnsOlidatiOn, mergers and acquisitiOns Of market players

Another important challenge that large insurance companies will face is specialization and focus on core activities (core business). The paradigm of growing in order to obtain better cost efficiency and im-proved operational efficiency has never been so important, but this new thinking will also require great-er specialization from companies.

According to several analysts, we can expect, in the next few years, more outsourcing of non-core activities, and a movement to-wards new strategic alliances.

strOnger regulatiOnIn the main economies of

the world, regulators plan intense changes in regulation and super-vision of insurers in general. The focus will be on making the risks taken by these companies more transparent. In other words, this identification applies not only to risk underwriting, but also opera-tional risk, credit and insurance market. There is no doubt that the insurance industry will be subject to more stringent oversight, as it has occurred in recent years.

Another challenge is the “Sol-vency II”, an initiative of regula-tion that should change the way in-surers will manage their business-es. However, it is also likely that higher capital requirements will be required, similar to what is occur-ring not only in Brazil but also in other countries since 2006.

prOducts With the opening of the reinsur-

ance market, the major insurers will launch new products to meet those risks that have not been met so far.

Individual Life Insurance cov-erage for life (lifetime) solve the problem, or risk, of discontinuity of coverage when protection is most needed, therefore it should appear as a trend for the coming years.

With regard to corporate in-surance such as “Group Life”, the big news and market trend are not related to the product itself, but to the inherent processes of the busi-ness. Several insurers must provide or improve their billing systems and insured movements via In-ternet, creating more convenience and safety in the process.

analysis and acceptance Of risk - underwriting

A new system will emerge, which should take away from in-surance brokers the responsibility and burden of the personal state-ment of health and risk (DPS) . This process will be done by a sys-tem of ‘tele-underwriting’ or risk acceptance by telephone. While the client is interviewed by phone, their responses are transmitted digitally to the broadcasting sector of the insurer, which stores data or makes a transfer to an automated underwriting environment. In cas-es of no history of health, it might mean instant approval and a policy issued much more promptly.

multicHannel service centersThe Internet and digital devic-

es (cell phones, iPads) are changing the way people live, relate, behave and, nowadays, they are literally, largely responsible for a change in behavior.

Insurers will face the chal-lenge of increasing their power of reaction and response, supported by these various channels. Such an environment will require the com-pany to implement processes that are mutually supportive and at the same time, be agile enough to re-spond to ongoing changes.

SaMY HaZanSuperintendent of Planning and Life at the marítima Seguros. Graduated in Business Administration at Fundação Getúlio Vargas (FGV-SP), specializes in marketing and Distribution at the université Catholique de Louvain. He is a professor of mBA in insurance at the FGV-SP and at the Foundation institute of Administration, university of São Paulo (FiA-uSP)samy@maritima.com.brwww.twitter.com/samyseg