ARGENTINA INSURANCE LANDSCAPE
Argentina is among the national markets form non-life insurance. In Argentina, the premiums growth is fast, a fact that is facilitated by high rates of non-life penetration growth and the booming economy. The non-life penetration growth and the booming economy. The non-life penetration has been increasing raising the life density. Many foreign insurers have established a relationship with the country. The country offers competitive landscapes for multinational insurance subsidiaries as well as local insurers. In the past, the country had financial markets instabilities a factor that has stunted the life sector development, as compared to non-life sector.
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The country offers an attractive insurance market. The country considers realization of potential returns risks, and its limits to potential returns are low. The country's insurance landscape is in non life and life sector is quite fragmented. This means that the foreign insurer and multinationals are the major participants, but there are great expectations that the landscapes will have changes in order to accommodate general participation by both foreign and local insurers. This will be achieved through consideration (Keller ; Bragadin, 2001).
Currently the cross border operations are limited by the fragmentation, but will future consideration, the chances of cross-border relations in the market are likely to increase. This is likely to be in the existing market, because there are very low possibilities of new market entrants.
Campaigns on transparency have been taking place in the country, and with economic and political reform the country expects to implement transparency in the insurance market, which will improve the market, and secure better and greater opportunities. There are great forecasts for Argentina (BMI 2008).
Argentina insurance market was regulated by a branch of economy ministry, superintendent of insurance. The insurance market, in Argentina had very few organizations, and dominating individual insurers. As the market progressed, the number of insurers reduced gradually, as a result of liquidation and close down of their operations. Studies show that the reduction was influenced by critical mass, economic quest and the consideration of the industry. The country has a stale currency condition which is expected to facilitate development of life market statistics seem to prove this because as per the 2001 estimation the life insurance premiums in Argentina were about 2.5 billion. In Argentina, when the insurance company needs to raise the prices of the insurance services they are obliged by law to notify their customers in a way that the customers will get an understanding of the reason of increase in the price. The insurance companies are expected to notify their customers when they need to renew the insurance policies. The customer need to understand and be willing to bear with the changes in the policy for the insurance company to renew it. There are set laws to guard this, and any company that breaks the law get legal punishment. National supervisory of insurances deals with such offenses, and gives appropriate punishment to the offenders.
The total revenue of the industry are increasing steadily, and studies show that the growth and development of the industry is higher than the GDP growth (Outreville, 1990, pp. 490-495).
A total of two hundred and thirty companies are registered to work in the country, out of the total, twenty seven companies are retirement insurers, fourteen deal with compensating workers, sixty threat in life insurance, and one hundred and twenty six are involved with life, and non life insurance.
The insurance market in Argentina is composed of general insurances which deals with non-life insurances such as workers compensation, automobile insurances, fire, theft, public transport and civil liability among others, and life insurance which is involved with group life, individual life, health insurance and personal accidents among others.
The Automobile insurance constitute the highest percentage of the total premiums in non-life insurances, while the group life insurance dominates in the life-insurance. The market concentration, shows that about fifty percent, of the total premiums are underwritten by a group of about twenty insurers.
The non life insurances are usually written through brokers but in cases of automobile insurances, direct sales telemarketing is usually used. Life insurance is written through agents, whereby the insurers have individual sales forces. There are developmental changes, which are making brokers and telemarketing in the insuring channels.
Major insurances in Argentina
Property and Casualty Insurance
Many insurance Companies in Argentina have specialized providing property and casualty insurances. Other companies have incorporated the policies in their services. This insurance policy is of major interest in Argentina, as it covers businesses and industries, whether in manufacturing processing and agricultural sector. The policy is organized in segments considers specific business lines. These segments include: regional segment, which deals with commercial insurance of the industries and businesses' products and customers. The specialty segment considers the industries premises and completed operations, professionals liability , commercial automobiles, products and property liability lines. Reinsurance segment involves brokers, while the alternative market segment is a non-profit , and considers customers from governmental and commercial entities, such as group of employees, employers and other people willing to manage potential risks.
The insurance policy involves insuring lives involved in the business or industry practices, and compensating the business. This is very important because policy compensates the industries which in pays the beneficially of insured people. With a clearly stated insurance policy, solving such claims become easy (Insurance Broadcast, 2008).
Insurance companies in Argentina, considers a number of factors when calculating the policy's cost. These factors determine the amount one is supposed to pay for the policy. For example people are categorized depending on their mortality rate. The higher the mortality risk of the group one is grouped in, the higher policy cost you are expected to pay. For example, very young children and particularly infants are at greater risk of mortality compared to adults. This means that the insurance policy for them will cost more.
Insurance companies in Argentina base the cost of insurance policy on the interest rate, which they get from their money investments. This means that when the interest rates of their investments is high, the cost of the insurance policy will be low. The cost of insurance policy is also based on the insurance company's operating costs. For example, when the company uses a large amount to develop, implement and run the policy, then the cost of the policy will definitely be high to cover up the operating costs.
There are different types of Property and Casualty insurances. These types are based on the number of people covered, the types are based on the number of people covered,the types of premiums premium flexibility, and the duration of he insurance among others.
Premium – Two types of premium are available, the risk premiums and fixed premiums. With the fixed premiums, the individual is expects a constant payment for is made throughout the insurance period, while the risk premiums keeps increasing with the insured age. This means that if one chooses fixed premiums, despite how long he/she lives, the premiums will be similar to one who died after a short time after insuring (Insurance Broadcast, 2008).The risk premiums benefits those who live longer, because the age and premiums increases simultaneously.
Premiums payment flexibility – There is savings life insurance, and traditional life insurance. The difference is that the savings insurance have flexible dates and amount in the premium payments, while the traditional insurances premium payments require set dates.
Duration – There is long-term insurances, and temporary insurances. The difference i that a policy has specified time p for the temporary insurance, unlike the life long insurance which covers the entire insurers working life.
Covered people,/ property
– Casualty insurance may covers multiple people, collective individuals. This means that the policy varies with the number of people covered by the insurance. The difference is that the multiple persons and collective individuals insurance covers many people, but the payments are made after the first person or last person in the group has died. Similar issues are considered in property.
The insurance covers household materials and individuals. The policy considers personal accidents, fire and water damages, and accidents that occur to domestic employees. However, the policy don't consider war and natural disaster damages, or the properties tear and wear. When insuring households, it is good to ensure that the value placed by the insurances company is equivalent to the actual value of the property. The information should always be preserved in a way they can be retrieved in future, because lack of such information may hinder compensation.
In Argentina, insuring motors is more common than life insurance. The insurance is mandatory in accordance to the law, and it involves covering the insured person, driver, and a third party, in accidents, theft, and damages caused by fire. The premiums are paid based on the sex, marital status, car use, car brand and model, and the geographical location of the car. The age of the car is usually considered, because many insurance companies in Argentina hardly insures old cars, and they place independent values to parts of the car which are not original form the manufacturing company.
In Argentina the AIG travel guards has requisite travel insurance to all visitors in the country. This has made many tourist to visit the country, especially with the medical insurance support, when skiing, flying and cruising as a result of the country's terrain, the infrastructure, and more specifically roads are steep, increasing the likelihood of accidents when traveling. The Argentina travel insurance companies have policies which cover the medical expenses, medical emergency, treatment expenses, trip disruption among other supports to the travelers. this means that the policy compensates for monetary losses incurred after changing traveling plan, especially if the changes are made from reasons that cannot be avoided (World maps, 2008).
The travel insurance in the country can be annual especially for business travelers and frequent travelers, or can be made per-trip especially for the tourists. The plans provided by the insurance companies in the country are responsible for safe delivery of the travels to their homes, and in cases health hazards while touring in the country, the company ensures that they get to the hospital of their choices.
The flight insurance is responsible for safe and convenient flights. In cases where the flights are canceled without the customers request or willingness, the flight insurance ensures that the customer gets the benefits. In cases of flight accidents or clashes, the family or beneficiaries are compensated by the insurance company. Likewise the skiing and cruise travel insurance in Argentina ensures that any accident encountered in the process are covered, as long as the customer has register or rather has applied the particular insurances plan.
U.S Insurance Company in Argentina
United States insurance companies such as XL insurances offers insurance services in Argentina. Argentina has enabled the XL insurances company to form global product development team that enables the company to improve their way of managing their customers risks needs.
The country has provided the company with opportunities to identify new products and evaluate the existing ones as a way of enhancing the development of the company (Carolyn, 2008). The company aims at forming global products development team, which will help the company to develop and be able to operate globally.
The country has strong profits from the insurance industry. Within a five-year duration, the country returns. The equity average profit of the industry is about 19%. The industry has improved capitalization in the country. The industry has maintained low costs in insuring, with a minimal interest rate despite the low rates in the general interest, that exposes many insurance companies to liquidity, the insurance companies liquidity rate is low. The poor operating environment, and the Argentina's increased risks, ensure that the companies underwriting leverage increases. This has also been achieved as a result of countries high risk assets such as government bonds.
Comparing the insurance industry with other industries in the country, the insurance financial strength rated are relatively high. The strength in this case is based on the aspect of the companies effectiveness and commitment to the customers. The companies are committed to timely and consistent payments to the customers and repayment of the senior policy holders obligations and claims.
The inflation, protectionism, over regulation and the states mismanaged reinsurance monopoly has greatly interfered with the insurance market in Argentina. The market is fragmented under developed, and over regulated, factors that have in stabilized it, increasing the costs of premiums and making it weak.
The state-owned re insurer (INDER), was liquidized. The liquidation eliminated a high percentage of the4 entire reinsurance premiums, draining a lot from the insurances sector. The INDER had been unable to pay large amounts of claims after several years of bankruptcy. The liquidation has limited the development of the insurance industry and has created share out to an extent that many domestic insurance companies in Argentina, have decided to liquidate, merge or sell.
Travel insurance has increased the number of tourists, because it offers security. Its medical insurances support tourists from other countries can fly, cruise or ski in the country. The tourists are source of income for the country, meaning that the greater the number of tourist in the country, the greater the benefits, in terms of money. Travelers can travel comfortably in Argentina, knowing that their physical security as well as health is managed.
The personal insurance (life and properties ) enables the insurer to get compensations when accidents or damages occur. The benefits helps them to continue with their living standards especially in cases of property damages (Bertranou, 2003, pp. 28-34). The insurances company is under reforms after liquidation of the state-owned re insurer, and they have struggled to deregulate non-life insurance policies and rates, and to allow foreign companies with foreign capital to engage in insurance practices in the country. Initially, foreign firms were discriminated in the operations, but currently the industry is ensuring equal treatment to all firms, whether foreign or local. The industry has provided better opportunities by tightening solvency requirements and currently the industry is financially developing. Although the country is composed of small business, it is still developing and the growth is quite encouraging.
Threats and risks
According to the global local currency insurance financial rating, the strength of the industry, can only be rated locally and nationally. The insurance companies in Argentina are at relative credit risk, but in global scale, the comparison is invalid.
Argentina has speculative sovereign rating, which has been influenced by debt moratorium, legal environment weakness, and the interference in the country's financial systems. The global local currencies rating together with the national scale shows the country's credit risks.
Personal accidents, in groups or individuals are considered to be attracting the industry. This is evidenced by the life insurance force in the insurance market, especially within the past five years. Senior customers buy group personal accident policy so that in case of the employees death the company can compensate for the death, as well as release future civil action in future form the deceased heirs.
International insurers prefer life insurance, specifically the group coverage packages. The Argentina insurance companies considers group life attracting because of the county's economic status, which makes the customers to compete especially on quality, excellence and the prices of the services.
Automobile risks are the major attracting risks in the insurance industry in Argentina. This is greatly influenced by the fact that the Argentina law requires all registered buses, cars and tracks to have a third-party liability.
Worker related claims are the industry's advantages. Many Argentina citizens work to earn living, and also compensating workers is compulsory in the country. This creates a pool of customers, who require compensation in cases of losses. Workers are likely to encounter sudden and violent losses and injuries during their working either related to the occupation. This argues the employers to buy policies for their workers.
Engineer and construction related claims are not attractive in Argentina's insurance industry. This is because only there are very few claims, and only a small number of insurers are involved in the engineering and construction business. The few projects in engineering and construction are included in the property policy.
Bertranou, F. (2003). Market-oriented health insurance reforms in Latin America. Health science journals,47(1), 28-34.
BMI. (2008). Independent forecasts and competitive intelligence on Argentina's Insurance. Retrieved from May 10, 2008, from Business Wire Website: http://www.reuters.com/article/pressRelease/idUS165317+24-Apr-2008+BW20080424.
Carolyn, M.(2008). XL Insurance global product development team. Retrieved from May 10, 2008, from Thomson Reuters Website: http://www.reuters.com/article/pressRelease/idUS16452.
Insurance Broadcast.(2008). Insurances newscast. Retrieved from May 10, 2008, from InsuranceBroadcasting.com Website: http://www.insurancebroadcasting.com/050908-r5.htm.
Keller, G., and Bragadin, J. (2001). Argentinean insurance market. Retrieved May 10, 2008, from IRMI Website: http://www.irmi.com/EXPERT/Articles/2001/Keller03.aspx.
Outreville, F. (1990). Economic significance of insurance markets in developing countries. Risk and Insurance journal, Lvii(3), 490-495
World maps. (2008). Travel Insurance in Argentina. Retrieved from May 10, 2008, from Maps of the World.com Website: http://www.mapsofworld.com/argentina/argentina-tourism/travel-insurance-in-argentina.htmlHAMILTON.
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