Carriers seeking share in Brazil's life insurance market must address distribution challenges and develop savings-oriented products to help dissuade consumers from channeling increasing levels of income into a private pension segment dominated by bank- owned insurance subsidiaries, according to a new A.M. Best Co. report.
According to a release on July 10, distribution stands as the loftier challenge for nonbank owned life insurers, given that product delivery has been built largely on the banking sector's extended network of branches and customer relationships. Banks' consumer-oriented emphasis on marketing savings products has added further momentum, leaving nonbank owned life insurers with a limited ability to compete for the growing level of income held by Brazil's middle class.
Perhaps an even more critical challenge is achieving a favorable spread between projected operating margins and the overhead of tailoring a distribution strategy for life products. There is a parallel hurdle in developing and deploying a universal life product that melds the accumulation component with a death benefit, but at a price that can generate volume and foster sustainable growth.
The tax benefits of two long-term savings products continue to appeal to Brazilian consumers.
One of these retirement offerings alone, vida gerador de beneficio livre (VGBL), accounted for nearly 70 percent of the BRL 62.5 billion (USD 30.4 billion) that Brazilian consumers technically spent on life-related insurance products in 2011, according to the Superintendence of Private Insurance (SUSEP).
A.M. Best Company is an insurance rating and information source.
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