Latin America Is Not One Market

Gilad opened with Buenos Aires: Christmas in summer, asados, and alfajores. Hugues Bertin has lived in Argentina for 15 years and has three sons there, though, he admitted, he doesn’t like mate.

About Hugues Bertin

Hugues Bertin is an actuary and the founder of Digital Insurance LatAm, a consulting firm that works with the insurtech ecosystem across Latin America. He began at PwC in the insurance sector, then moved to Argentina to work for BNP Paribas Cardif, where, until 2017, he was CFO and head of digital transformation. He then left the corporate world to become an entrepreneur.

A Tour of the Region

Hugues argued that every country has different needs, but they share enough of a common base that his firm can work across the region, with clients from Chile and Argentina to the Dominican Republic, Mexico and Brazil.

Brazil: The Most Disruptive Ecosystem

Brazil is roughly a third to 40 percent of the Latin American insurance market and, in his view, the most innovative. He cited Nubank, a neobank with about 26 million clients, which entered insurance with life coverage in the previous three months and sold about 90,000 policies in that time (around 30,000 a month), entirely digitally. The product is term life at a very low premium, built with Chubb’s Studio, and about half the buyers were buying life insurance for the first time. He also noted the regulator, SUSEP, implemented an insurance sandbox and, within five months, authorized eight insurtechs to operate as full-stack insurers for three years.

Mexico: Telematics and Parametric

Mexico is about 25 percent of the market. It has many traditional players moving fast, including Qualitas with telematics, a growing insurtech association, and reinsurers such as Munich Re and Swiss Re working with insurtechs. Hugues mentioned B2C earthquake parametric cover and a freemium health insurance model that gives limited free medical-expense coverage for a few months and then cross-sells, plus a peer-to-peer style model approved by the regulator in which the platform handles the mutual and only the excess of loss goes to a reinsurer.

Argentina, Chile, Colombia and Peru

• Argentina is about 10 percent of the market, a huge market of 42 million people but a difficult economy. The notable story is Mercado Libre, the “Amazon of Latin America,” which is testing insurance, such as extended warranty and cell phone cover, and has invested in a Brazilian insurtech.
• Chile is small (about 17 million people) but mature, and Hugues helped create an insurtech association, Insurtech Chile, two weeks earlier, to collaborate with peers in Brazil, Mexico and Argentina. Of its roughly 36 insurtechs, he highlighted a bank-backed insurtech and Joycar, a telematics solution in which his fund invested, which operates in Chile, Peru, Mexico and, by then, the US.
• Colombia is about 10 percent of the market, with an insurer he called the most interesting multi-Latin company, Sura, which collaborates with the startup ecosystem. Nubank’s founder is Colombian, and Rappi, the delivery platform backed with $1 billion from SoftBank, had just announced a financial arm with a local bank.
• Peru is smaller, but has two strong traditional insurers, Pacifico and Rimac.

Trust and the Underserved

Gilad raised the micro insurance question: premiums must make sense for local wallets. Hugues said Latin America hasn’t yet built products for underserved people; insurers serve the middle and upper-middle segments. He pointed to Mercado Libre’s fintech arm, Mercado Pago, as an example of the ambition: only about 50 percent of people are banked, so a digital wallet can serve the rest, and insurance adapted to their needs can follow.

On trust, he cited a survey that asked whether people would buy insurance from a big tech company like Amazon: about 30 percent in the US said yes, 20 percent in Europe, 15 percent in Japan and 50 percent in Latin America. People are highly digitized (he said 99 percent of Brazilians use WhatsApp), and they trust big tech or a new insurtech more than the traditional insurance market.

Scouting and Investing

Hugues invests through HS Capital, with investments including pet insurance, a Canadian company, and Joycar in Chile, and was putting together a third fund. $4 million had been committed toward a target of $30 to $50 million. His team’s scouting found 321 insurtechs in Latin America, which they divide into three groups: new business models (about 12 percent), distribution (about 46 percent), and enablers for insurers and intermediaries (about 43 percent). In his view, for early-stage companies, the team and culture matter most, since the business model will change as the market shapes it.

The TDI Academy for Latin America

At the end of March, Hugues was launching with The Digital Insurer (TDI), the global insurance knowledge platform, an adapted version of the TDI Academy for the Latin American market: online classes in Spanish on topics such as how the world is changing, new technology, data and analytics, customer experience and new business models. It includes follow-up on every student to complete modules every two weeks, Q&A with experts and a final project in which each student creates a new value proposition, with the best ones ranked. He said the aim is to propel Latin America’s insurance sector in the next normal.

What About the Brokers?

Gilad asked how progress is made when brokers control the market. Hugues said insurtech isn’t competing with brokers: many digital brokers come from traditional brokerage, and COVID accelerated adaptation. Brokers who used to drink mate with clients in person now do it over WhatsApp. Gilad added that agents won’t spend time on a $200 policy with a $12 to $20 commission, and need a solution that is affordable for low-income customers.

Advice: Patrimoine Éphémère

For his recommendation, Hugues chose a book by Olivier Jaillon, CEO of Wakam (formerly La Parisienne Assurances, founded in 1829), which is turning the old insurer into an insurtech, for example by insuring Tesla by the mile in the UK. The book, titled Patrimoine éphémère in French, argues that in the future the use of an asset will be more valuable than the asset itself, which opens the way to new embedded insurance.

Key Takeaways

• Brazil (about 40 percent), Mexico (about 25 percent), Argentina (about 10 percent), Colombia (about 10 percent) and smaller markets each need their own approach.
• Nubank sold roughly 90,000 digital life policies in three months, half to first-time buyers, showing life insurance can sell digitally.
• Brazil’s regulator authorized eight insurtechs as full-stack insurers within five months of its sandbox.
• About 50 percent of Latin Americans would buy insurance from a big tech company, compared with 30 percent in the US, 20 percent in Europe and 15 percent in Japan.
• Underserved customers remain largely unserved, and wallets like Mercado Pago may open the door.
• Brokers are adapting rather than being displaced, with WhatsApp replacing the mate meeting.
• HS Capital scouted 321 Latin American insurtechs; founders’ team and culture matter most at the early stage.