Car drivers should check frequently the validity of their insurance policies, since, this 2019, all vehicles circulating in Mexican territory must have civil liability coverage, and thus avoid a fine of up to 4,100 pesos.
Although this type of coverage has a large market in Mexico, figures from the Condusef indicate that only 3 out of every 10 cars in the vehicle fleet have auto insurance, that is, less than 30% of the drivers, even though the insurance of civil liability is already mandatory to transit.
“A person does not acquire a car thinking that it will collide, however, the possibility is latent from the moment it circulates on the street,” says Recaredo Arias, director of the Mexican Association of the Insurance Industry (AMIS). “It is preferable to be prepared not to receive a direct blow to the portfolio,” he adds.
In the last five years, there were, on average, 360,000 road accidents nationwide each year, a considerable incidence rate, although the trend continues to be downward.
“The insurance for automobiles remains the second place in the category of damages and accidents in Mexico, with 19.3% of the policies contracted,” says the director of AMIS.
Car insurance will grow 3.8% in five years, largely due to the official decree at the beginning of the year, when imposing the third party damage policy in a mandatory manner, this measure will also help the growth of the insurance sector.
For its part, the National Commission for the Protection and Defense of Users of Financial Services (Condusef) estimates that automobile accidents have an economic impact in the country of more than 120,000 million pesos per year, while the driver’s pocket It can cost an average of 35,000 pesos.
DATA: 120,000 mdp is the economic impact of automobile accidents in the country
Area of opportunity
An important item in the insurance business is cargo transportation, which is experiencing a growing wave of robberies for the last six years. What caused that, currently, only two companies participate in the assurance of both units and cargo content.
The cost of road insecurity for the insurance sector is 92,000 million pesos (mdp) per year, according to a report presented at the end of 2018 by Refugio Muñoz López, president of the Commission for Security and Crime Prevention of the Confederation. of Industrial Chambers (Concamin).
To deal with this problem, the industry invested significantly in technologies to monitor their units: locations, routes, speed of transfer, waiting times in booths, time of loading fuel, amount of gasoline that is loaded, and so on.
The World Insurance Report 2018 report from the French consultancy Capgemini, presented last June, points out that the availability of all this technology could yield information that allows to better understand the risks and, therefore, make the insurance valuation efficient and offer them at prices accessible.
But it is not so simple, because as the president of the AMIS says, there is something that technology can not measure: the ethics of people. “Technology is not helping fast action, the security chain is complex and corruptible.
There is a corruption of authorities. When investigations are carried out, it is clear that organized crime is intrusive with a high level of logistics, “says Recaredo Arias. One of the most important players in the transport sector is Quálitas, which covers 47% of the premiums paid by this economic sector. The insurer considers that employers make an important effort to improve safety, not only against theft but to avoid road accidents. However, he points out that there is still a way to go in terms of using the information to improve insurance, and that this is reflected in the premium payment price.
“The use of technology will not reduce the cost of premiums, but it will make them more attractive in the market because it will help reduce the number of accidents and their severity. The fewer risks there are, the lower the cost, “says Margarito Castillo, Quálitas risk director. All the information would allow building products to measure risks like never before.
But now there is one that worries the director of the AMIS: that the hundreds of InsurTechs (new generation insurers) comply with the rules of the game based on the current law and regulations. “The authorities will be worked on. The new services will be allowed to evolve in 24 months towards a formal insurer. Once they learn, operate and have a financial margin they would have to comply like everyone else, “says Arias.
With the tire half low …
Another factor that reduces the performance of insurers in Mexico is the drop in sales of new cars, particularly those that come financed from the agencies. Currently, 8 out of 10 new vehicles, on average, leave the agency with endorsed insurance.
According to figures of the Financing Report of the Mexican Association of Automotive Distributors (AMDA), prepared with information from the consultancy Jato Dynamics in May, during the first five months of the year sales were recorded for a total of 362,648 new units that were marketed via financing, which represented a decrease of 9.1% with respect to the same period in 2018.
Despite the fact that fewer people buy a car, the insurance industry expects growth of up to 3.8% in the country between 2019 and 2023. The insurance purchased at the time of buying a financed car usually lasts for as long as the automotive credit.
In terms of car loans, these represent 76.2% of the total of new cars sold. Recaredo Arias says that there is a phenomenon that hinders a good structuring of the insurance market, caused by the cars of mobile platforms for private transportation.
“There are problems with the cars that are used for Uber, DiDi, Cabify, and Bolt because they acquire damage or civil liability insurance without identifying which will be for taxi service with the application. The risk factor is different in these vehicles because when driving more hours, the probability of suffering a road accident or theft is greater, “the AMIS director says.
Despite these challenges, the insurance industry will have a good year and an interesting future, based on the convergence of various technologies and smartphones. Millions can buy insurance from their cell phone and buy the one that best suits their needs. However, the sector must overcome different legal and logistical aspects.
Both Arias, from AMIS, and Castillo, from Quálitas, agree that insurance services through applications are now ready for companies and users to adopt as part of their daily lives. For now, insurance policies for cars will grow, against all odds, and against all odds.
The Mazatlan Post