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José Antonio Palacios

MEXICO - Finance

Flexible Coverage

Head of Insurance & Prevision, Global Retail & Bus, BBVA Bancomer

Bio

José Antonio Palacios graduated in Mechanical and Electrical Engineering from Monterrey Tech. In 1977 and later obtained a Master’s degree in Mechanical Engineering from Texas A&M University in 1980. He then went on to earn an MBA from the Wharton School of the University of Pennsylvania. Prior to his career at BBVA, he worked for eight years at Grupo Protexa, an industrial group in Monterrey, in a series of senior positions.

"I think we have good products and a strong understanding of our market."

How do you contribute to financial education in the country?

Financial education is advancing in Mexico. We take part in BBVA Bancomer’s Financial Education Program. This is a comprehensive program that comprises 11 different products, including life insurance, and has accumulated more than 800,000 participants in different interactive outlets during 2013 and more than 2.3 million since 2009. We were the first to include an insurance product as part of the financial education effort in Mexico. The program has tools that make it highly interactive for the participant, and that allow simulations of costs and coverage. You can estimate the amount your coverage will cost, depending on your needs. It helps people to understand the purpose of insurance and how it can be of great help when an unexpected event occurs. I believe that we are moving in the right direction to develop financial education in Mexico.

Do you think that higher preventative insurance penetration is achievable in Mexico?

We still have a lot of work to do as a sector. We are advancing, however, and in this respect the bancassurance business has really been an important factor in this development. We have reached segments of the population previously not served by traditional channels of insurance. The increasing offers of non-traditional insurance products like accident, travel, hospitalization, or cancer insurance have also been a relevant factor in increasing the penetration of insurance products. The number of our banking clients that own insurance policies is increasing. The number of direct-sale insurance products is also on the up.

“I think we have good products and a strong understanding of our market.”

What is your target position in the market?

Our objective is growth. I think we have good products and a strong understanding of our market. We have models that allow us to create differentiated offers for our clients. We also benefit from being a part of the BBVA group. We try to complement the group’s banking products and services, offering insurance products that are aligned to client needs. Having major business in the mortgage sector is also a benefit for our portfolio.

How will the new road regulations affect the insurance sector?

Mandatory insurance on federal highways is a positive development in the regulatory framework. We believe that this should be expanded to become mandatory for every vehicle in general. When you see the cost of having mandatory auto insurance and you compare it to the cost of filling up your tank, the annual cost of the insurance is equivalent to, for an average car, two-and-a-half tanks of gas. There are many instances of injuries from car accidents, where people end up without coverage. Only about 26.5% cars are protected by insurance. There are some states that have mandatory insurance, but it is not really enforced. We are working with the Mexican Association of Insurance Institutions (AMIS), presenting arguments to government officials and supporting mandatory insurance for autos. Mandatory insurance is often seen as simply a way to provide more business to insurers, but the benefits gained from coverage in the incidence of traffic accidents is good for the whole of society.

How competitive are foreign companies in Mexico’s insurance sector?

In most countries, the large global insurance companies have a strong presence, but in México there are strong local players, too, which are highly competitive and efficient. In any country, each player has its own history. Some of the companies that today belong to international groups were originally local entities. International groups have the acquisition power that a local player probably does not. But, in the end, the success of the company lies in the people within the organization and the methodologies they have operating in México. There are benefits to being part of an international group, but I would not say that Mexican companies are at a disadvantage; they know the market, they have talented people, good processes, and they are efficient.

What is your view of the Mexican loan insurance sector and its potential for growth?

We are very optimistic about the future. The insurance sector in Mexico is still not well developed. It represents less than 2% of GDP and is at one of the lowest levels in the Americas. Compared to other countries, this indicator is affected by the fact that auto insurance is not mandatory and the disability/life coverage related to pension programs is not private. I believe that the market has much potential. People are becoming more aware of the benefits of insurance products, and more knowledgeable. If the banking penetration rate of a country increases, then the insurance sector also grows with it. México is one of our strongest bets for the future.

What are the challenges of the Mexican market?

The big challenge for all participants in the insurance business is to better understand the changing needs of our customers, and to run lean and efficient operations. We have to move from traditional products toward having a wider portfolio. We need to offer what the clients need and not what we want to sell. We also need to be willing to cover the needs of customers in a transition or temporary situation, such as being away on vacation. The challenge for us is to become a company with a more dynamic product offering. We have to adjust our products to new needs, provide offers at the right time, and be able to make these offers using the latest technologies. If you can understand the needs of your current and your potential clients, you can make the right offer.

© The Business Year – January 2014

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