The COVID-19 pandemic has been a tale of two halves for health insurance companies in Latin America – the surge in claims at the beginning of the outbreak was challenging but with health priorities reset, there is now growing demand for policies covering major medical expenses and life. But is this growth temporary or permanent?
Most health insurance policies do not cover pandemics but as the COVID-19 pandemic spread, state health systems quickly began to struggle and insurance companies were forced to cover COVID-19 without any deductibles or co-payments.
This reassurance led to many more policies being taken out as people worried about
contracting the virus. The owner of a Peru-based Insurance Brokerage reports, “We have sold more health and life insurance in the past seven months than in the prior two years. People are saving more and consuming less, and some of this differential is being allocated to health and life insurance.”
“People are saving more and consuming less, and some of this differential is being allocated to health and life insurance.”
Insurance brokerage owner, Peru
Our sources believe that policies will become more expensive, the CEO of a local insurance firm explains, “Policy renewals are going to be more expensive, every year they increase 10%, now they should increase 20%.” An executive at an international insurance company had a more conservative estimate, “Peruvian insurers are scoundrels! The annual increase is 3-8% in normal times and this could double post-pandemic.”
With higher volumes, higher prices and state funding for vaccines, insurance companies should be feeling pretty bullish, except they are not.
“Policy renewals are going to be more expensive, every year they increase 10%, now they should increase 20%.”
CEO, local insurance provider, Peru
Market competition is intensifying with aggressive pricing for new customers. For example, BUPA left Latin America several years ago but returned this year, CGB has also entered with aggressive pricing and other international companies, such as Best Doctors and Allianz are offering discounts and promotions for new policies.
Furthermore, payment defaults will become a growing concern as economies falter and unemployment grows. The owner of an insurance brokerage in Peru told us, “Before the pandemic, late payments were between 5 and 7%, they will easily double this year.”
Another trend to watch in the region is the vertical integration of insurers seeking to buy clinics. In Peru, for example, the two main insurance companies are already vertically integrated, “It has been the best investment,” explains the CEO of a local insurance firm.
If you’d like us to cover this in more detail, let us know!
