Mexico austerity measures could strike 2% off premiums
Mexican insurers are working to adapt to the new government's austerity measures that include ending coverage of medical expenses for tens of thousands of bureaucrats, looking to facilitate the transfer to privately paid policies for as many as possible.
The sector, nevertheless, is bracing to see as much as 2% of total premiums evaporate when current policies expire, according to the president of Mexico's insurer association (AMIS) Manuel Escobedo.
"In the short term, it means a reduction in the market for major medical expense [coverage], and it could be the case that life is affected as well," said Escobedo in an interview with local daily El Universal. "We will have to see how this reconfigures the sector."
The government of President Andrés Manuel López Obrador halted future payments on existing policies on January 1 and expects it to generate savings of some 5bn pesos (US$263mn).
Adapting to the change, Escobedo said insurers are developing new products targeting public employees who wish to maintain their policies out of their own pocket.
However, he noted that the ultimate success of those efforts will depend on the demand generated in the market segment.
"The insured will have to make a decision based on their financial situation and their interests as to what they want to do with their coverage, and the insurance sector, for its part, is preparing products and a selection to attempt to attend to their needs and new purchasing power capacity," said Escobedo.
AMIS' general director, Recaredo Arias, speaking to local outlet El Economista, acknowledged that the government is making a significant effort to optimize spending, but he believes that it should work with the industry to help provide those affected with the ability to maintain the low rates associated with group health and life plans.
"What we are looking for is to maintain these policies, which can be retaken by individuals through individual purchases, but looking for schemes where, for example, they are still treated as a group to have good price conditions and that they can maintain schemes such as the payroll discount," said Arias.
He noted that the cancellation of the policies could also overwhelm the capacity of social security institutions that provide medical care to public servants, such as public employee health system ISSSTE.
Calling attention to the holder of the largest medical expense policy with the former government - MetLife México, Arias said that the cancellation would no doubt have an impact on the company's premiums but it would not be "too big," noting that the US insurer had the financial reserves to fulfill all of its obligations moving forward.
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