Innovation is key to growth in Bolivia

A focus on innovation and expansion in segments such as microinsurance and other mass-market products are the keys for growth at Nacional Vida, one of Bolivia’s largest insurance companies, according to its president Jose Luis Camacho.

According to him, the Santa Cruz de la Sierra-based company is developing its premium portfolio at a faster pace than the average of the market, which already stands at an impressive 8 percent to 15 percent a year in the past two decades.

“Our life and health insurance operations have grown by an annual average of 20 percent to 30 percent in the past 10 years,” Camacho said.

He remarked that the performance is to a large extent due to a change of focus in the insurance business since the group changed ownership in the mid-2000s. Since then, the company adopted a strategy of focusing on technology and adapting products to the characteristics of up-and-coming, but still relatively poor, Bolivian consumers.

“Since 2005, we have striven to introduce innovation, especially on technology and customer services, and today we are leaders in the microinsurance segment,” Camacho said.

The development of microinsurance could sound like a natural step in an economy that has for a long time set the stage for several successful experiments in microfinance. The country is a pioneer in the concession of low value credit and other financial products that provide poorer citizens with access to financial services.

But microinsurance in reality constitutes a break with usual market practices and requires the development of products that can be sold at low prices while at the same time being profitable for the company.

“Bolivians today have higher purchasing power, and this has generated more demand for insurance and other services,” Camacho pointed out.

“Insurers have traditionally focused on the upper brackets of the market. The fact that we have entered other segments means that we have more room for growth.”

He added: “Our life microinsurance policies are standard products which offer coverages that are similar to those contained in more traditional coverages. They cover natural death, accidental death, disability and other risks that other policies also include. The difference is in the limits, which are adequate to the targeted market.

“We are talking about limits of $1,500 to $3,000, which are considerable sums in the context of Bolivia, where the minimum wage stands at $250. People perceive the coverage as a significant financial help in case of need.”

The products are distributed via third parties, including banks and microfinance institutions. It marks a departure from Nacional Vida’s traditional insurance business, in which the company mostly relies on brokers and its own sales force which, Camacho said, constitutes the largest network of insurance sellers in the country.

He pointed out that Nacional Vida is already selling some 10,000 to 12,000 life microinsurance contracts a month, and that health policies are doing well too. The group also sells non-life microinsurance products, although growth has been smaller in this segment, with sales reaching some 500 contracts a month.

“One important characteristic is that we have eliminated almost all kinds of exclusion from our microinsurance policies,” Camacho said. “The only ones that remain are global disasters, wars and nuclear catastrophes, that is, really catastrophic events that cannot be covered by these policies. But even then the client is covered in the event of death.”

Another necessary selling point, according to him, is the ability to make quick payments to clients who may find themselves in dire financial straits after a loss event.

“Payments of claims are processed via the financial institutions we work with, and they are made in 48 hours,” Camacho remarked. “This is something that enhances the trust of the clients, as in traditional insurance products settlements take more than 15 days to take place.”

Nacional Vida, which was created in 1999, is based in Santa Cruz de la Sierra and has a leading 37 percent share of Bolivia’s life insurance market. The non-life unit of the company, which was set up in 2007, boasts a 7 percent share of its own market. According to APS, Bolivia’s insurance supervisor, premiums in the Bolivian market reached $417 million in 2014, and amounted to $265 million in the first seven months of 2015.

Non-life insurance accounts for some 60 percent of the total, and life and health for 40 percent, said Camacho, who is also the president of ABA, the country’s insurance association.

Despite the fast development of recent years, he said, Bolivia’s insurance industry still has much room to grow, as it amounts to a mere 1.9 percent of GDP.

“There is a significant hurdle in the shape of the underdeveloped insurance culture in the country,” Camacho pointed out. “Bolivians do not have the habit of buying insurance products.”