BUSINESS PERFORMANCE
INDUSTRY SCENARIO AND PROSPECTS
Even though Brazil recorded a worse-than-expected gross domestic product (GDP) in 2011, the Brazilian economic performance exceeded that of the Eurozone and countries like the United States and Japan. This fact shows the Brazilian increasing ability to protect itself against external economic shocks and grow in spite of the international crisis.
The consistent optimism in Brazil for the past few years, which is expected to continue in the near future, is directly related to the so-called demographic bonus. In short, this is a period when the workforce largely exceeds the population of dependents, which is composed of senior citizens and children. To give you an idea, currently Brazil has two workers for each dependent. According to experts, the demographic bonus is the ideal condition for economic development.
However, for this condition to translate into actual results, we must consistently invest in infrastructure and education to reaffirm the prominent Brazilian role in the global economy. Once these challenges are overcome and considering a twenty-year estimate that Brazil will have a larger concentration of people aged 15 to 60 who, with more jobs and the ability to meet their most basic needs, will be able to amass more wealth, the insurance industry forecasts a scenario of increased growth opportunities.
Insurance penetration in Brazil is still low. Currently, only 33% of the Brazilian auto fleet have insurance on average. The São Paulo and Rio de Janeiro markets are the most mature, but even then there is room for growth. To this end, there are trends insurers must keep watching. The most relevant issues include monitoring the rise of the Brazilian new middle class (the C class) and the increasingly important role it has been playing as well as creating products and payment methods that are tailored to lower-income segments. At the same time, we must consider the effects of environmental degradation, which, because they are already intense in some areas, have been affecting calculations, losses, and premiums. Furthermore, we must also reaffirm the importance of insurance to protect property and life in Brazil.
In spite of these obstacles, we expect auto insurance, which is among the most popular in Brazil, to grow between 9% and 11% per year until 2013. Life and disability insurance should grow between 9% and 11% per year during the same period.
For retirement products, an average increase of 10% is expected through 2013, which will depend on an increased awareness from the public, who still does not prioritize retirement products. In general, property insurance is expected to grow, on average, 7% over the same period, but this is contingent upon awareness.
In Brazil, inland marine insurance is mandatory, but over 50% of carriers or 50% of shipments are not expected to meet requirements because of, basically, ineffective oversight. However, this scenario might be reversed because of increased professionalization and more stringent demands from the market. The annual growth rate through 2013 should be between 5% and 7%. Insurance for major risks and bonds have a lot of potential, with an expected annual growth rate between 20% and 40% from 2012 to 2013, because of the World Cup and the Olympics. Farm insurance should grow between 12% and 20% through 2013 because Brazil is now a bigger global producer of food and bioenergy.
However, for these estimates to come true, economic performance and demographic bonus forecasts must materialize. Brazil must keep evolving and increasing the income of the population and the insurance market and, specifically, it must keep seeking rules and resolutions to enable the development of products that can reach increasingly large audiences from several niches and income segments. We must also spread the insurance culture in the main urban centers and the more peripheral areas. Thus, our predictions for the years to come follow the same optimism.