Tri-Coverage

How have you evolved since the creation of Sagicor Panama and what has been your growth strategy?

I joined Sagicor in October of 2011 with the purpose of re-launching the company in Panama. The company entered the market in 1999 buying a small health portfolio and attempted to grow organically. However, there was not a clear strategy back then, and the main purpose of entering the market was because of Panama’s strategic geographical position, which could be used as a hub for future opportunities within the region. Today, we are working on an aggressive branding campaign. We have launched new products and our strategy is to continue to grow organically while also seeking M&A opportunities, though only for the right price and if they make sense. We are also taking advantage of some aspects of the new insurance law of 2012, which enables insurance companies to distribute their products through alternative distribution channels. This means that an insurer can use, for example, a pharmacy or a bank to distribute products tailored to their captive customers. In addition, the new law also allows insurance companies to develop their own sales forces of exclusive agents. Previously, independent agents often had no loyalty to one company. Now, companies can bring in people for training and development, and once they become agents they will be exclusive to one company. That gives the company greater opportunities to build up both brand and sales. We offer all familiar types of coverage such as the traditional individual health policy, the group health policy, and individual life policy. And then we have products that no one else has, such as the Triple Protector and Maximum Protector, critical illness products that cover you in the event of the diagnosis of critical disease such as cancer, heart attack, or stroke. Sagicor is also bringing some unique products with the purpose of strengthening its relations with brokers, such as a new individual health policy with international benefits and the only disability income individual policy available on the market.

In which sectors of the economy are your services most required?

The products we currently offer are mainly tailored toward the middle to high end of the market. Life insurance and individual health insurance have traditionally been products that the middle to upper markets buy. However, with the rise of micro insurance as a concept, there are a range of new opportunities cropping up in the middle to low end of the market, but they can be challenging as they require strong premium collection platforms. We believe there are a lot of opportunities within the micro insurance sector for the low end of the market, but first you need to identify high volumes and be able to implement proper conservation and collection strategies.

How did your portfolio evolve over the past few years at Sagicor Panama?

We have been growing at a rate of around 15% to 20% per annum. Our portfolio is quite small in Panama, with approximately $4 million in written premiums. Growth in the personal lines of insurance tends to be much more conservative than what is experienced in general insurance. We are currently working on quality of business and healthy organic growth, while strengthening relationships with key target brokers and closing some strategic alliances for alternative distribution as well. Sagicor today is the strongest insurance group in the Caribbean region, with a presence in the US and a clear vision to continue its expansion toward emerging markets in Latin America.

What are Sagicor’s financial expectations for 2014?

We expect to continue improving our results in Panama by taking advantage of the country’s continued GDP growth, expected to be between 7.5% and 8% in 2014. Panama is benefiting also from FDI and from a government strategy to provide incentives to those multinational companies that install their operations in Panama. Panama and Costa Rica are priorities for Sagicor, which plans to use these markets to penetrate further into South and Central America. Panama’s low inflation rates and high economic growth, along with macroeconomic events related to the Panama Canal expansion and the country’s financial sector, are all attractive characteristics of the country, which should continue providing growth opportunities within the insurance sector.

In your opinion, how do people here perceive the insurance sector?

Life and health go hand-in-hand with the education level of the people. In addition, if you do not have a strong network of brokers or specialized trained agents, people tend not to be as conscious of personal insurance. Individual life is definitely the hardest product to sell, and one of the strategic reasons behind Sagicor’s continued presence here is that life is its main line of business. Panama’s population still lacks a high level of education generally speaking. This factor, in addition to the lack of strong sales forces properly trained and specialized in life insurance, has contributed to a relatively low penetration rate in individual life. This low penetration rate, accompanied by the strong economic growth that the country is experiencing, provides great opportunities for companies that are specialized in life insurance. If you compare the penetration rate of life insurance in Panama with that of developed economies such as Chile or the US, it far exceeds that of Panama. People are actually unprotected at the family level, and one of the initiatives that we are pursuing is the development of an exclusive, well-trained sales force of agents to conduct needs analysis door-to-door and stress the importance of life insurance. This must then be backed up with educational campaigns. Life insurance is not a cheap product, but you can sell it based on the real income of each family. Panamanian incomes have been rising; and thus, life insurance in Panama should do much better going forward.

Which sector has the most potential for growth?

I would say that the one with the most potential for growth is the middle market. Most higher income individuals are already aware of insurance because of their education. Some already have policies from US companies. But the middle-class market promises the most because it is less served and most remain underinsured. Most people within this segment tend to only have mortgage-related life insurance, but remain unprotected on the family side.

What challenges will the insurance sector face in 2014?

In Panama it will be a matter of competition, as the market is simply too fragmented with 33 players. The margins have slipped and some lines of business are actually losing money. The automobile industry lost heavily in 2013, for example. Other property and casuality lines, such as fire, have not been profitable. There are tight margins on the technical aspects of the business. In health, everyone is competing on pricing and the claims are currently above desired ratios. This is putting pressure on the industry and may have an impact on the cost of insurance. Health businesses are also impacted by inflation. If medical expenses rise, then your health coverage premiums too need to increase. On the life side of the business, it largely depends on the interest rates and US policy going forward. Individual life insurance was a business that traditionally took most of its profits from investments of reserves. Today, it is very important not only to optimize investments but also to seek proper technical results.

What is your forecast for the Panamanian economy for 2014?

Panama will continue to grow. Perhaps not at 10% or 11%, but it will maintain a healthy level of growth nonetheless, expected at least in the range of 7.5%-8%. Meanwhile, I do not foresee any major political risks in the short term, and should the government be re-elected, it should continue to pursue business-friendly policies.

© The Business Year – March 2014