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| Individual customers Distribution of insurance in Brazil, to individuals Generally, products are distributed in different ways to each different income group. The low take-up of insurance in the past has been due to a poor level of awareness of the different types of insurance available, as well as a perception that insurance was unaffordable, and of limited use. This has also partly been the result of poor marketing efforts of insurers until recently. Customers have also shown signs of being brand-conscious when they buy financial products, although this is also changing, as the market becomes more competitive and better regulated. Uneven income distribution Income distribution among Brazil's 160 million inhabitants is very uneven (see chart below). Overall, Brazil is a middle-income country, with a GDP per head of around $4,000. The modern cities and prosperous countryside of southern Brazil are similar to Europe, while northern parts are very Third World in nature. The long-term trend in income distribution shows that it is improving.
The pace of change in income distribution in Brazil accelerated after the implementation of economic reforms, in 1994. Traditionally, insurance companies in Brazil have targeted consumers in income group ‘A’. However, income group ‘A’ represents only 5% of Brazil’s population. Between 1994 and 1999, some upward migration occurred between the lower socio-economic groups, from group ‘D’ to ‘C’, and from ‘C’ to ‘B’. The buying power of individuals in groups ‘C’ and ‘D’ in particular improved as a result of the stabilization of the economy since 1994, when inflation was brought under control and the real income of the average worker increased significantly. The improving disposable income of groups ‘B’ to ‘D’ is generating a lot of interest among insurers, principally because of the enormous growth potential of these much larger groups of consumers. Brokers remain the main distribution channels for insurance in Brazil, accounting for some 70% of sales. The remaining 30% of sales are accounted for by the sale of insurance through bank branches (25%), and through direct marketing methods (5%). The involvement of brokers in a direct or indirect form is mandatory in Brazil. The figure of an 'agent' (a salesman working purely on behalf of the insurance company) does not formerly exist, although brokers often have an ambiguous role.
A greater emphasis is now being
placed on marketing Since the sector began growing and competition began arriving from overseas, insurers have begun to recognize the crucial role that marketing has to play in driving growth. Local firms still lack experience in the effective use of marketing and there is scope to improve the awareness of insurance products among the public. New products such as long-term life insurance, for example, tend to be poorly explained to customers and this has restricted growth. There is scope for targeted marketing campaigns that could increase the penetration potential of companies within the industry. There is also scope for a more effective use of customer profiling and targeting, to make direct marketing a more effective means of distributing personal insurance. Insurers are looking at new
distribution channels Firms are keenly exploring both broker and non-broker distribution channels. Insurers are selling products through banks, supermarkets, gas stations, motor accessory shops and subway stations. They are also looking at the use of affinity groups, direct marketing, and alliances with firms such as credit card operators, and are beginning to explore the use of the Internet as an interface for both the client and suppliers such as brokers. Distribution is the main worry
for foreign insurers entering the market Marketing skills and expertise
are at a premium |
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