financial services and tourism are the top contributors. Unemployment hovers at around 3.5 per cent. And yet around half of the population is unbanked. The government has provided a level of welfare and utility services; although two-thirds of its hospitals are private. Mexico is also a country vulnerable to natural disasters. Earthquakes, floods, hurricanes and other meteorological events such as the El Niño phenomenon are a constant threat. Reports suggest that the hurricanes Ingrid and Manuel left a $5.7billion trail of destruction in 2013, and in 2014, Hurricane Odile caused $1.2billion in economic losses. Yet, despite the risk of unforeseen events threatening both casualties and damage and destruction of property, access to insurance is just above two per cent. Meanwhile, Mexico is facing a demographic shift in population similar to that experienced by European countries, where the insurance industry is recalculating its exposure to risk: half the domestic Mexican population is forecast to be 50-plus by 2060 as substantially fewer children are born, emigration increases and the life expectancy of those who stay behind lengthens. Sinead O’Connor, a collaborator in digital customer experience at Citibanamex, says it all goes to make Mexico a unique market for fintech and insurtech. ”One of the challenges we have is obviously the level of access to banking and financial services,” she says. “Only half of the population has a bank account, and so there’s a way to go in terms of financial education. When we look at insurance, only a little over two per cent have access to it.” It means a major chunk of a new entrant or even an existing transformer’s efforts must go into educating people about the need for insurance and making the terms and conditions comprehensible and relevant to them. The other aspect of the challenge, says O’Connor, is ‘how do we ensure that we’re creating products that are suitable for the profile of individuals that operate here in Mexico today?’. Given the audience profile, Citibanamex believes it’s a smarter sell to offer entry level insurance at the point of need: a one-time car journey, for example, could be the baby step towards taking out broader P&C indemnity. There is another statistic that plays to this argument. While 50 per cent of the Mexican www.fintech.finance
population is unbanked and the insurance sector unorganised, the Ernst & Young (EY) Mexico Insurance Report 2018 suggests that almost 65.5 million people have access to the internet and 81 million use mobile phones. Of this, 76 per cent have smartphones. This offers a huge opportunity for global insurance companies to reach out to customers and provide communication and instructions about relevant insurance coverage and benefits through mobile apps.
A new CoDi of conduct This year, the country’s recently elected left-leaning government put its weight behind digital transactions by launching a pilot CoDi payment system. CoDi, which doesn't charge a processing fee and uses the existing SPEI payment rails, allows anyone with a mobile phone to scan a QR code with the transaction processed through the central bank. It’s hoped that by persuading merchants to adopt the system, millions of Mexicans will be coerced into opening a bank account, giving more people access to products such as loans, insurance or investments, the government has said. By the end of September, all six national banks, including Banamex, should be on board with it. CoDi could be a useful platform on which to offer bancassurance, which, according to EY analysts continues to see double-digit growth. Its study goes on to forecast that digital transformation and solutions will play a larger role in the country’s insurance market over the next 10 to 15 years. O’Connor adds: “One of the things I think financial institutions have thought a lot around, including here at Citibanamex, is what should be our core capabilities? What do we need to ensure that we’re getting it right? I think one of the challenges we have, especially large-scale retail banks, is that we do everything across the spectrum, for all segments and for all products, and so the depth and width and breadth of what we need to try and do to get it right is huge. One of the things that partnership (with insurers) is enabling us to do is focus on what these core capabilities need to be, make sure we’re getting those right and
then use partnerships with fintechs and other companies to help create a more seamless experience for customers. “The biggest opportunity today is ensuring end-to-end servicing and transacting in digital, making the interaction with insurance products easy for customers,” she adds. “From visualising the policy to creating modifications as needed and in a contextualised fashion, and processing claims.” More than 90 per cent of Citibanamex’s digital customers are now using the bank’s mobile app. “We’re growing at three times the rate in mobile as we are on internet,” says O’Connor. “So mobile obviously gives us the means to be contextual. Knowing where the customer is and what they are doing offers a huge opportunity for insurance to deliver contextualised products through mobile.” Citibanamex’s exclusive and long-term partnership with Chubb, announced in June 2018, allows the second largest P&C and auto insurer in Mexico to offer a broad range of non-life insurance products to Citibanamex customers through multiple channels: branches as well as digital and direct marketing. Its insurance products extend across P&C, auto and to business, including corporate accident and health. “In its strategic alliance with Chubb, Citibanamex is starting to leverage a lot of what we’ve already done around banking products: how, for instance, we profile our customers using cookies, Facebook and Instagram, with the objective of finding new, tailored means to offer relevant products to customers that have been shown to garner their interest,” says O’Connor. “Then we use direct digital channels to ensure that we can create seamless experiences.” It brings her back to the challenges insurers have in the region: “To make sure customers understand what the products are, and how they can use and modify them, because, obviously, when you put the insurance product into use, that’s when the perceived value is greatest. “They are the experiences that we need to build out on mobile today.”
The depth and width and breadth of what we have to try and do to get it right is huge
Issue 13 | TheFintechMagazine
Fintech Finance presents: The Fintech Magazine Issue 13