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Reaching the underinsured segments

Interview - November 29, 2013
Offering all types of private and corporate insurance products, Rimac Seguros oils the engine of the insurance industry's growth by making it more readily available and affordable
The insurance sector is a small yet fast-expanding sector in Peru, where penetration stands at less than 2% of GDP. Over the past 12 years, premiums have grown at an average rate of 15% annually. Moreover, given the gradual rise of the middle class and the country’s consistent economic growth (and not to mention its natural hazards like earthquakes and flooding), insurance is becoming a more attainable and attractive product. 
Established in 1895, Rimac Seguros is Peru’s oldest and largest insurance company, boasting market share of over 33%. Rimac, in turn, is part of Breca Group, one of Peru’s biggest holding companies. Among the group’s other subsidiaries is Clínica Internacional, ranked among Latin America’s best 20 hospitals. 
Last year, both World Finance and a public opinion poll named Rimac as Best Insurance Company in Peru. 
CEO Rafael Venegas discusses the sector’s growth and potential, and why Rimac remains market leader in this dynamic industry. 
Please share your view on the growth of the insurance sector in Peru.

For the last few years Peruvians have enjoyed a significant growth in income and now a larger percentage of the population has access to goods and services that used to be unaffordable as their household income was spent, almost in its entirety, for survival. 
The growth of the insurance sector reflects the greater maturity of the Peruvian consumer, who now demands the same products that can be found in more developed countries. However, there still are groups of people that do not buy insurance, either because their income level does not allow them to, or because Peru lacks a sufficiently developed set of rules that could let us offer and distribute massive insurance products, unburdened with the extreme formalities applied to traditional products.
This process is ongoing and, in fact, is being headed by Rimac, who broadened the market by offering for the first time very affordable, very simple car theft, property and health insurance for low-income sectors through non-traditional channels.
What obstacles do you see in the future that could restrict the sector’s growth?

There is a huge deficit in healthcare facilities. The insured market is growing fast and we need to develop more and modern health centers and hospitals to properly service that increasing demand. But, more than a threat, we see it as an opportunity. We are integrating our former stand-alone clinics into the company and investing large sums of money in infrastructure, technical equipment, technology and human resources, both in Lima and the major cities of Peru, where we are currently developing new hospitals and clinics. 

“The growth of the insurance sector reflects the greater maturity of the Peruvian consumer, who now demands the same products that can be found in more developed countries”

CEO of Rimac Seguros
That means a huge investment in infrastructure and medical equipment, for example. Rimac is investing about US$200 million in the next few years, both in Lima and in the key cities outside Lima.
Another obstacle we’re addressing is awareness. Insurance in Peru has always been a luxury for the middle top classes. It was impossible to afford for most of the population, who felt it as an expense, and the risks were very high. But that is changing fast.
Now, in Rimac, we are growing by penetrating what used to be unreachable markets, but first, it is necessary to educate the public and build amongst them an insurance culture. We have to get people and companies to think about insurance as something necessary to assure their growth and not as an expense, which is difficult because it isn’t tangible and they almost never use it, so they don’t know if the service is good or bad. I’ve told audiences that we sell people a product I hope they will never have to use.
How does Rimac stand out from the competition?

Rimac’s stock is the oldest in the Peruvian stock exchange (144 years), our growth is stable (we have been growing at a rate of 16% per year), and we are the company with the largest net income of the insurance market. 
Until 2010, Rimac had an international Investment Grade rating of BBB- from both Fitch Ratings and Moody’s Investor Services. In 2011, Fitch decided to upgrade us to Investment Grade BBB and Moody’s changed our perspective from stable to positive. 
Also in 2011 the local representatives of both Fitch and Moody’s upgraded our operations from A to A+, the maximum grade in the country. Rimac is the only company in Peru with these local and international ratings. 
On the other hand, our investment team manages a considerable amount of money every day and an important part of it goes through the Integrated Latin American Market (MILA). About 40% of our investments are outside Peru, mostly in Latin America (Colombia, Chile, Brazil and Mexico), though we also like to focus in other developing countries, such as South Korea and on AAA corporations, mainly in the U.S. and Latin America.
Locally, we have invested a considerable amount of money in infrastructure – energy, mining, roads – as well as in retail and other growth sectors. As the leading insurance company in Peru, we are by far the largest investor in all new projects that come along. We like to be there from the very beginning and grow with them.