José Antonio Correa Etchegaray, CEO, Qualitas Seguros • Interview

How is Qualitas responding to the low penetration rate for auto insurance in Mexico?

Our penetration in the Mexican market is around 30%, so about 70% of the market is up for grabs. Even though penetration is relatively low now, if we take the right actions and develop the right product, people will buy more. We also have a project called ODQ to put small offices in small towns to increase coverage. The coverage we are doing will also increase participation. We also insure 50% of the truck fleets around the country. In that area, we know we are much better prepared to provide services to large fleets around the country.

What are your main priorities when it comes to the company’s international expansion over the medium term?

In March 2019, we acquired an insurance company in Peru, and we will look at opportunities there as they appear. We are not taking an active role, but if they are presented to us we will certainly consider more. Central America

is relatively small and is not of much significance in terms of volume. However, we are servicing the border with the US and three of the four states along it: California, Texas, and Arizona. We do not intend to compete with the big players there, but instead focus on those who live in those states and commute across the border frequently. That market has grown nicely, and so has our subsidiary along with it. Peru is our newest market. It is interesting because it is comparable to the Mexican market. It also has more potential in terms of market size. Penetration rates also sit around 30%. We are putting the entire business in place to determine how far we can go in Peru and South America with our model in Mexico. We will continue checking out opportunities as they arise to see if we can replicate our model successfully. We will continue to maintain a focus on service, costs, centralization, and specialization. We are pleased with what we have seen so far with our expansion outside Mexico. ✖

when it comes to strengthening our presence revolves around digitalization. What we intend to do is to make everything virtual; in other words, customers need not go to an office for a consultation. A company representative is not required at a hospital to get services. Most importantly, they will be able to interact directly with the company. These are new times that call for new needs, which have led us to be more practical. And these needs must be met and will start us on the path to more efficiency and effectiveness in the end. We started to focus on digitalization in 2019, because we consider it to be a necessary transition. We plan to offer our services to our customers no matter where they are located, as quickly as possible, and at the best-possible quality, which can only be achieved with technology; however, we must be careful with digitalization; we must know exactly what we need to digitalize. We are taking the company's critical processes, such as subscriptions, claims payments, payments to suppliers, commission payments, and so on and working on digitalizing them. At the end of this process, we will finish digitalizing a large part of the company but this is the first phase. Operating systems, peripherals, and so on should be around a USD34 million in investment.

OUR MAIN STRATEGY TODAY, WE EXCLUSIVELY OFFER INDIVIDUAL LIFE COVERAGE

in Mexico, sold through agents. Life insurance requires dedicated and educational interaction from agents. People need to understand that such products bring a measure of safety to their lives. Today, we are focused on knocking on doors, and we have a plan to grow our sales force aggressively. We are set to hire 1,000 agents in 2020, 2,000 the year after, and 3,000 the year after that. In fact, we plan on extending this hiring program until we reach 10,000 new agents in a year. We have a plan approved by the US for a large investment in Mexico. Achieving such growth will require considerable scale in terms of new offices and staff. In 2020 alone, we plan to invest MXN542 million. Prudential is the fourth-largest insurance company and the 10th-largest asset manager in the world. Today, we are the 17th-largest life insurance company in Mexico, and by 2025 we want to be the sixth or seventh largest. This means around 15-fold growth by that time, but we are confident of achieving this. We have two unique retirement products geared at the millennial. This in itself determines the nature of the salesforce, as a millennial is more likely to purchase from another millennial. Duly, the average age of our agents is in the low 30s.

WE HAVE FIVE LINES OF BUSINESS IN MEXICO,

the two main ones being global auto and retail. In retail, we are also the absolute leaders in Mexico in extended guarantees and work with the main retail chains in the country. We sell a large volume of insurance coverage, also for mobile devices like cell phones against theft or accident and damage. The main product, however, is extended guarantee, and in these chains include all electrical products that can be sold with an extended guarantee. E-commerce is growing extremely rapidly. In 2019, we closed two important deals with Amazon Mexico and Mercado Libre, where the deal was regional encompassing Argentina, Brazil, and Mexico. We have already implemented the deal and are selling Mercado Libre in Mexico as an exclusive provider of extended guarantees. Amazon does not allow for exclusivity, whereby we compete with two other companies as one of the three options for extended guarantee in Amazon Mexico, which we are winning so far. This allows us to start in the e-commerce business, which is not an easy sell. In a store, a salesperson can explain why customers should get an extended guarantee, while in e-commerce there is only a line on a page with an option to purchase guarantees. We have been on a steep learning curve regarding e-commerce as it is developing rapidly.