Inflation in Mexico will have negative repercussions on auto insurance .
“Inflation is a threat to the growth of the sector, since it weakens the purchasing power of households and companies, which restricts the income available to purchase new insurance products,” Moody’s said in a report.
The document indicates that before one of the , insurers will not see new clients, reducing their profitability. Moody’s does not expect companies to pass on all inflationary costs to their clients, especially where there is strong competition.
Health and life insurance have performed well due to a lower incidence of Covid cases, even despite the fifth wave that was registered last June.
“Towards the end of 2022, we expect the moderate claims rate to strengthen the technical results of life and illness, mainly the groups that faced claims levels in 2021 in excess of any historical record,” Moody’s detailed.
As of December 2021, the average cost of claims for life insurance was 97%, compared to 86% in 2019, as of March 2022 it was 75%. In the case of accidents and illnesses, the average cost of claims was 77% compared to 68% in 2019, while as of March 2022, 64% was reported.
It’s not all bad news. For Mexicans who have life insurance linked to a savings product, the increase in interest rates by the Bank of Mexico (Banxico) could offer an attractive value.
“Long-term life insurers can have access to investment instruments with better rates that strengthen their cash flow and performance in the medium term. However, in the scenario of persistent inflation, the erosion of the saving capacity of the households would reduce the demand for these types of products,” Moody’s said.
