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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 andchallenges

SaMY HaZan

Reections on the Life andPrvate Pensons arketsn 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 BraZil

Brazil 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 changeshave 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

Sary n englsh

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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, increasingthe 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 toobtain 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 regulatiOn

In 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 subjectto 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 sectorof 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 centers 

The 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 HaZan

Sperntendent of Plannng and Lfeat the maríta Segros. Gradated nBsness Adnstraton at FndaçãoGetúlo Vargas (FGV-SP), specalzesn marketng and Dstrbton at theunversté Catholqe de Lovan. He sa professor of mBA n insrance at theFGV-SP and at the Fondaton insttteof Adnstraton, unversty of SãoPalo (FiA-uSP)@.o.b 

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