For individual and family protection, Life insurance is an extremely significant financial product. In this sense, and to the extent that it is more prevalent in a given country, it helps to stabilize society. Manuel Aguilera, General Director of MAPFRE Economics, discusses the role that Life insurance plays in economies and, specifically, in Latin America. In an interview with the magazine másSeguros by AUDEA (Asociación Uruguaya de Empresas Aseguradoras — the Uruguayan association of insurance companies), he explains how Life insurance contributes to the creation of domestic savings and, therefore, the process of capital formation and economic growth. This is why Aguilera considers public policies aimed at stimulating the development of Life insurance to be essential. He explains “we have analyzed international experience and it confirms that where this source of financing is more abundant, societies have stronger economies and, as such, can provide their citizens with better prospects.”
MAPFRE Economics recently published a report called “Elements for the development of Life insurance.” The report contains a comparative analysis of the international experience with regard to Life insurance and the mechanisms that have been used to make this product a public policy tool to stimulate savings, especially in the medium- and long-term. It provides a detailed overview of the rich typology of products in the markets that were analyzed, according to a classification that groups them into five major categories: risk, savings, investment, income and retirement-specific products. It presents a global analysis and specific study of a selection of representative markets that covers the United States, Mexico, Brazil, Spain, the United Kingdom, Italy, Japan and Hong Kong.
In the interview, Aguilera splits the aspects of public policy aimed at stimulating the development of Life insurance into three groups. Firstly, there are the prudential regulation measures to which the insurance activity is subject. In this regard, public policies can have an impact on several aspects. For example, providing appropriate rules for access to the insurance market, considering that the operators of Life products are highly specialized financial institutions. Likewise, the expert points out the need for regulatory stability for businesses whose nature is long-term, as well as the importance of establishing regulatory incentives for innovation when designing products to be brought to the market.
Secondly, there are measures linked to the role of Life insurance in the context of supplementary pension schemes. “The aim is to define and implement public policy lines aimed at establishing supplementary pension schemes, using savings mechanisms offered by insurance products. These policies could include mandatory workplace pension schemes, for example (such as the United Kingdom’s successful system), or the creation of voluntary pension schemes that complement compulsory public schemes,” adds Aguilera. Finally, he highlights the public policy measures related to the implementation of tax incentives. In his opinion, the advantage of applying incentives to savings and investment products as well as Life Protection insurance products should be highlighted here, in addition to the need to avoid disincentives of applying indirect taxes to Life insurance products, which, from international experience, “do not improve collection rates but, rather, neutralize the potential of Life insurance as a generator of domestic savings.”
Click here to read the full interview.
Click here to access the full MAPFRE Economics report