Financial Crime World

Mexico’s Insurance Sector Urged to Embrace Inclusivity and Innovation

Mexico’s insurance sector has faced several challenges in recent years, particularly with regards to goals 1.3.4, 6.2.2, and 6.2.3. A comprehensive review conducted by the Mexican government has identified key areas that require improvement.

Call for Improved Data Generation

The review emphasized the need for more comprehensive data generation and publishing at the national level. To address this issue, it recommended that:

  • The National Insurance and Financial Commission (CNSF) publish a quarterly report specifically on insurance, covering efforts towards financial inclusion, product supply with a gender perspective, and expansion of distribution channels to underserved areas.
  • Insurtechs provide information that facilitates product understanding and request representative data to understand demand for insurance.

Enhancing Consumer Awareness

The review also highlighted the need for better tools to help consumers understand and compare insurance products. It suggested:

  • Financial authorities and trade associations generate more effective product comparison tools to promote savings in insurance policy sales beyond automobile insurance.
  • Insurtechs provide information that facilitates product understanding and request representative data to understand demand for insurance.

Exploring Public-Private Partnerships

The report stressed the importance of exploring public-private programs and initiatives to promote financial inclusion in insurance among vulnerable populations. This could involve:

  • Creating a system of public-private programs, initiatives or subsidies to serve currently unserved segments.
  • Replicating the first-loss guarantee financing scheme delivered by development banks.

Assessing Public and Private Healthcare Options

The review also emphasized the need for a thorough assessment of public and private healthcare options available to the population. This includes:

  • Examining the complementary relationship between social security coverage and insurance coverage for major, minor or prevention medical expenses.
  • Identifying gaps in healthcare services and exploring ways to fill them.

Linking Insurance with Existing Programs

The report recommended linking inclusive insurance with existing public and social programs targeted at vulnerable populations, such as:

  • Youth
  • Agricultural producers
  • The elderly
  • Indigenous communities

Simplifying Documentation Requirements

To reduce barriers to access, the review suggested simplifying documentation requirements for insurance policies by creating products with simplified documentation requirements according to premium and sum insured ranges.

Establishing Inter-Institutional Working Groups

The report emphasized the need for inter-institutional working groups to address regulatory barriers and determine the appropriateness of creating specific definitions of inclusive insurance that incentivize the development of products for underserved populations.

Increasing Outreach through Improved Distribution

To increase the reach of inclusive insurance, the review recommended using non-traditional channels commonly used by target markets for sales, placement, and post-sale follow-up. It also suggested:

  • Partnerships between the insurance sector and savings and credit cooperative companies (SOCAPS) and popular financial companies (SOFIPOs).

Embracing ESG in Insurance Business Strategies

The report encouraged the industry to internalize sustainability and environmental, social, and governance (ESG) criteria into their business dynamics, which could produce benefits such as:

  • Facilitating access to markets
  • Reputational improvements

Designing Customer-Centric Products

To address the lack of flexibility in insurance coverages and premiums, the review suggested designing customer-centric and demand-based products that cater to the needs and particular contexts of different populations within Mexican society.

Developing Insurance-Specific Financial Education Program

The report emphasized the need for a structured and permanent financial education program on insurance at the sectorial level, which could be integrated into school curricula. This would help build trust and improve consumer awareness about insurance products.

Finally, the review recommended facilitating inter-institutional discussions on the possibility of creating a permanent budget to address natural disasters, following the termination of the Natural Disaster Fund (FONDEN).