The greater the economic uncertainty, the more litigation grows. This seems to be the synthesis of the insurance industry version 2022. The reality shows a convulsed scenario, especially in the automotive industry: “The loss frequency is already at values equal to or higher than the pre-pandemic and the cost of claims is increasing at a rate higher than the CPI due to the increase in vehicle prices and the shortage of spare parts.”, highlights Emilio Caratti, Claims and Operations Director Box. The complexity of the insurers’ accounts is based on the fact that “it has not been possible to transfer the claims cost increases to the price, a situation that is reflected in the negative technical result presented by the insurance market,” added Caratti.
The companies are facing a situation that stems from insecurity, but also from Creole vivacity: “Complaints of partial theft, especially ‘wheel theft’ show a growing frequency that seems to have no ceiling. The average costs of these claims increase at a rate well above inflation and the fraud component associated with them is at values never seen before”. For that reason, insurers are intensifying the use of systems and investing in technology to attack these fraudulent practices, “although the cases detected, with sufficient evidence to achieve the withdrawal of the insured, continue at very low values with respect to the incurred claims”admits the executive.
Numbers. Those who are deeply familiar with the insurance market describe it as a business with a strong “financial” ascendancy. Therefore, in times like the present, where the economic context reflects an unstable situation, the item suffers the direct consequences of reality. “If your business depends a lot on the financial result, you are in trouble, because its incidence is very high compared to the business itself. Inflation, rates, litigation and judicial decisions are those that harm the sector. The entire market is a solidarity system. It works with legal certainty since the contract is between parties. If Justice passes over the contract, then a great legal uncertainty is generated ”, he maintains William Plateformer Vice Superintendent of National Insurance.
On the other hand, there is a niche that is still not sufficiently exploited in Argentina: life and retirement insurance. These are an important leg in the global market, according to specialists, and that could even enlarge the cake by up to 50%. “Here we have half a market that is not developed. In other words, the business could grow twice as much in terms of investment, of premium with respect to the Argentine GDP”, Plate describes.
“As we are in an economic-financial crisis, today the insurance sector is getting smaller. The business has that because it is directly affected by inflation. Investments are what support the risk that companies issue. They are poorly diversified and there is a problem with rising prices, with solvency. It has more to do with the macro than with the sector itself. It is as a result of the impact of the macro”, he expands.
Nicholas Saurit Romanvice president of the Argentine Association of Insurance Producers, coincides with the diagnosis: “The sector is not far from the economic reality of Argentina in recent years. It is a reflection of the economic situation, ”he indicates. And he expands: “The economic deterioration implies fewer assets, less economic activity to insure and the lack of income of the insured to contract adequate coverage”, expands Saurit Román. This translates into an unavoidable reality for the business, “It is a sector also hit by the very negative effects produced by inflation.”
Saurit Román highlights, as favorable points for the item, the “evolution” in communication, technological tools, platforms, which “improve the customer experience”. On the other hand, it mentions as points against “that there are insurers that do not comply or comply very late with their payment commitments (especially to insurers and to third parties) that this situation is aggravated by the economic situation and has a historical aggravating factor that is the lack of of effective control of the Superintendence of Insurance of the Nation”.
When it comes to highlighting the most requested products and those that register a growth in demand, automobile insurance is the one that stands out, followed by the home and commercial branch. “In industry, companies have opted in some cases to lower coverage, focusing on the most catastrophic, such as Fire Insurance or Civil Liability”, expands Saurit Román. By the way, he highlights that “also the effect produced by the pandemic, it marked a before and after in different ways, it undoubtedly changed habits, consumption and even work and personal perspectives.”
Likewise, in the pandemic, a demand arose that involved the coverage of electronic equipment in the homes of employees, as a consequence of the massiveness of the home office. “The way out of the pandemic in economic terms is complex, the economic recovery (or rebound effect) brought some relief, but this is totally diminished by the current crisis and especially by inflation that hits the sector forcefully due to the increase in costs of spare parts, labor, etc. In terms of premiums received, they are always below inflation, adding one more problem”, says Saurit Roman. The year ends with these worrying numbers, but also, as Caratti projected, it offers the sector the opportunity to incorporate new trends such as automation and the use of artificial intelligence, omnichannel and technologies such as blockchain, big data and digitization.. The challenge of the future to maintain competitiveness.
MARCELO ALPHANO
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by Marcelo Alfano
