View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Analysis
March 21, 2013updated 13 Apr 2017 8:40am

Peru – Start spreading the news

Life insurers are rushing to take advantage of Peru’s low penetration rates but keeping marketing and distribution costs under control remains a key to success, according to the report Key Trends and Opportunities in life insurance in Peru: 2012 to 2016, available at the Insurance Intelligence Center.

By Verdict Staff

The Peruvian insurance industry has witnessed significant growth over the last five years. Gross written premiums of the life insurance segment grew at a CAGR of 20.9% during the review period of the report (2007-2011). Meanwhile, the gross written premiums (GWPs) in non-life, personal accident and health, and reinsurance segments grew at CAGRs of 16.9%, 11.3% and 11.5% respectively. The dynamism of the insurance sector, and the life segment in particular, was supported by strong macroeconomic trends, a rise in consumer awareness and an increase in spending on insurance products, particularly retirement savings products.

Peru witnessed sustained economic consolidation and an improved credit position during the review period. The country’s economic growth was driven by factors such as higher domestic consumption, an increase in industrial production and extended availability of credit to individuals and business consumers. Faring better than its peers in Latin America, Peru accumulated massive currency reserves and reduced its public debt to less than 20% of its GDP. The rise in international trade and the dynamism of the construction sector were also growth drivers of Peru’s economy.

During the global financial crisis of 2008 and 2009, the asset quality of Peruvian insurance companies was affected. However, conservative investment strategies implemented by these companies, such as larger investment shares allocated to government debt as compared to domestic stock markets, resulted in a reduction of asset quality deterioration and stable financial income, as compared to insurance companies in other countries in Latin America. The overall insurance industry’s combined ratio increased from 67% in 2010 to 72.4% in 2011. This was driven by an increase in the management expense ratio that rose from 17.2% in 2010 to 20.2% in 2011.

Insurance in Peru has one of the lowest penetration rates in Latin America, a key factor attracting global investors to the industry. The industry’s written premiums as a percentage of GDP stood at 1.5% in 2011, as compared to the Latin American average of 2.5% in the same year. Meanwhile, Colombia’s insurance industry penetration as a percentage of its GDP stood at 2.4%, Argentina’s at 2.5%, Chile’s at 4.1% and Venezuela’s at 4.4%. This low insurance penetration, coupled with Peru’s robust economic growth, provides a unique opportunity for global investors to look for business ventures in the country.

Peru is expected to continue posting strong GDP growth over the forecast period of the report (2012-2016). The economy would have expanded at 5.5% in 2012 and is projected to grow at an annual rate of 6.0% through 2016. However, the market size and importance of the insurance industry, as compared to other industries in the Peruvian economy, is likely to remain low. The industry is well placed to offer solutions to emerging risks but large and complex risks are bound to depend on global insurers. Price and relationships are vital in driving the purchasing attitude of consumers.

The Peruvian insurance industry is expected to grow across all segments over the forecast period. The GWPs in life, non-life and personal accident and health segments are expected to grow at CAGRs of 11.0%, 10.4% and 7.6% respectively. The financial income reported by insurance companies may remain low due to the low interest rate regime in the country. In order to counteract this issue, a number of insurance companies have been looking into alternatives such as investments in commercial real estate.

Segment Outlook

Growth in the Peruvian life insurance segment (standing at a CAGR of 20.9% in GWP during the review period) was driven by a strong economic expansion, an increase in employment levels, a strengthening local currency, an increase in disposable income and a rising demand for life annuity and pension products.

The life insurance segment accounted for the largest share in the overall insurance industry during the review period. Growth in annuities specific to private pension fund schemes remained the key driver for overall growth, particularly after the implementation of the Special Early Retirement Program, otherwise known as Régimen Especial de Jubilación Anticipada (REJA). REJA’s attractiveness would have been at its height by the end of 2012 which should translate in a decline in premiums of this product over the forecast period.

Peruvian life insurance companies took a cautious approach towards the pricing of policies following the global economic crisis, coupled with claims-related cost controls, the implementation of better risk management strategies and reductions in overall operating costs. These measures resulted in the decline of the life segment’s overall combined ratio to 60.5% in 2010. This trend is expected to continue over the forecast period as a result of a better pricing discipline, higher subscriptions to life insurance policies led by rising product awareness and overall growth in the economy. All of these factors will lead to stability in the combined ratio of this segment with the ratio ranging between 63.2% and 64.9% between 2012 and 2016.

In terms of preferences, Peruvian individual life insurance consumers continue to favour savings-oriented products along with protection options as simple individual life insurance products lack the tax incentives. Regarding commercial life insurance, there are two key products related to compulsory protection. In accordance to the provisions of Peru’s Life Insurance Act, compulsory insurance coverage must be offered to employees that have worked for a minimum of four years at the same company. This generated GWP of PEN113 million in 2011. The second compulsory insurance product is known as Supplemental Work Risk Insurance and aims at providing cover for high-risk professions, generating a GWP of PEN218 million in the same year.

Furthermore, the Peruvian government has encouraged the middle and lower income population to buy life protection cover by promoting micro-insurance products. By the end of 2011, there were 100 different micro-insurance products providing life and personal accident cover aimed at low income consumers. According to statistics provided by SBS, the volume of micro-insurance policyholders increased by 63% from 331,835 in 2010 to 540,890 in 2011. According to the regulations passed by SBS in 2007, the micro-insurance amount was capped at PEN10,000 and monthly policy premiums at PEN10.

?Distribution channels

Most of the life insurance products in Peru posted significant growth during the review period as a result of aggressive marketing strategies. These included a greater use of alternative distribution channels -such as e-commerce- and developing a bigger sales force. The value of commissions through the e-commerce channel grew at a CAGR of 46.8% during the review period, outperforming all other channels by a wide margin. However, efficiency ratios for companies that developed large-scale marketing channels in an effort to expand their market reach have deteriorated significantly, demonstrating that keeping marketing and distribution costs low remains a key factor of success for Peruvian life insurance companies.

The direct marketing channel is the largest channel for distributing life insurance products in Peru. The total value of commissions through this channel reached PEN94 million (US$35 million) in 2011, accounting for a total channel share of 56.3%. Life insurance companies preferred to employ personnel to promote their insurance policies to individuals and businesses. However, they also used other direct marketing channels such as telemarketing, postal mails and e-mail marketing, as well as their own or third party call centers. The value of commissions through this channel grew at a CAGR of 17.9% during the review period and the percentage share of total market commissions for this channel grew at a CAGR of 1%.

Agencies emerged as the second largest distribution channel for selling life insurance products in 2011. The total value of commissions through this channel reached PEN55 million (US$20million) in 2011, accounting for a share of 32.9%.

Bancassurance was the third largest distribution channel for life insurance and pension products. The total value of commissions through this channel reached PEN12 million (US$4 million) in 2011, accounting for a share of 7.1%. The key drivers for growth in this channel were the rising level of consumer credit and the rapidly growing banking industry in the country. Leading insurance companies such as Rimac and Pacifico, which held a collective share of more than 50% of the life insurance segment, are increasingly making use of this channel. Rimac uses the channel through a tie-up with BBVA. Pacifico has access to this channel through a partnership with Credicorp’s subsidiary Banco de Crédito del Perú (BCP).

For more information on Life Insurance in Peru, Key Trends and Opportunities to 2016, contact the Insurance Intelligence Center on +44 (0)20 7406 6596, or email

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy


Thank you for subscribing to Life Insurance International