insurtech latam
Em Conversa Insurtech South America

Em Conversa: Delving into LatAm Insurtech with Nelson Castellanos

As of April 2023, there were 1,000 active fintechs in Latin America (LatAm) with a vast majority focusing on financial inclusion, tackling the issue of 70 per cent of the population not having access to formal financial services. Em Conversa looks to uncover what the future holds for fintech in the region as it was valued at $2.1billion in 2022 and continues to rapidly grow.

In our latest instalment, we sat down with Nelson Castellanos, chief partnerships officer at HDI Embedded – an embedded insurance provider, part of the Talanx Group brand (a European insurance group). Born in Colombia, Castellanos has worked in the sector for over six years; during this time, he has worked on insurance programmes for some of the largest corporations globally. Focusing on LatAm insurtech, we spoke to Castellanos about the future of the market in the region.

Nelson Castellanos, chief partnerships officer at HDI Embedded
Nelson Castellanos, chief partnerships officer at HDI Embedded
What is your experience in LatAm?

I moved to the UK roughly 16 years ago, but as a Colombian, I have always been very close to the LatAm market. It helped that some of the companies I have previously worked at had a foothold in the market, keeping me in the loop.

For example, one of them partnered with one of the largest private operators at the time, Despegar (imagine them like the LatAm version of Skyscanner) and that was one of the best embedded insurance programmes launching in LatAm delivering solutions in the market. Regardless of where I have been in my career, I have always kept an eye on what’s going in the region as it truly is an untapped market for insurance solutions.

What are some insurtech trends we’re seeing in LatAm?

Insurtech has been very active in the region. The fact large insurance companies like Allianz, MetLife and Zurich have expanded there is evidence of this. What makes it even more interesting though, is that each of these large corporations has brought their own insurtech twist to the region. They’re definitely helping drive the sector’s growth.

Interestingly, what we’re seeing in the region is that insurtechs are targeting different verticals instead of having a general approach to the market.

Partnerships are a big thing as well. We’ve seen big insurtech providers like Origin arrive in the market and make a big impact. They closed a partnership with Bolero, a low-cost airline in Mexico. As a result, they provide travel insurance for Bolero’s customers. We have also seen Nubank partnering with Chubb to deliver home insurance to their consumers.

How does LatAm fintech compare to the rest of the world? 

Most of the population in LatAm doesn’t have access to financial services. Therefore, there is a huge gap for fintechs and, in turn, insurtechs in the region.

To make the region more accessible to fintechs, many countries like Colombia, Chile and Argentina are adjusting their regulations. Ten to 15 years ago, every country in the region had the same financial services conglomerate with strong ties to each country’s government. Consequently, it was very difficult for new entrants to enter the market due to the regulations implemented by the governments.

Another interesting thing to note about the LatAm region and how it compares to others is the emergence of the middle class. As such, the demand for financial services has also emerged. One great example is Nubank. It used to be impossible for a Brazilian to get a credit card. Nubank has completely uprooted this though. In just five years, the neobank has made it possible for nearly every Brazilian to get a credit card now.

What are some unique insurtech challenges in the region?

Distribution is the biggest challenge when it comes to insurance. The majority of the time, when you want an insurance policy, you must go to an insurance broker or office. Showing how out of date it is, the modern solution is very similar to that found in Europe 20 years ago – where you need to fill in a form to buy your insurance products.

Therefore, creating channels that can distribute insurance policies is proving to be a challenge currently.

The second challenge is competition. The penetration rates in the region are growing and there is a lot of interest from different insurance companies. Be it traditional insurance providers or local ones – many are trying to capitalise on these new opportunities.

The last issue is really with customisation. Many people do not have a policy tailored to them and as such can find themselves paying for something which doesn’t cover what they need.

How do you think fintech and insurance are going to evolve in LatAm? 

Regulations becoming more flexible are definitely going to play a big part in advancing both the fintech and insurtech sectors. We will see more players enter the market and that’s always a good thing.

In regard to distribution, I think we’ll see more non-financial services companies become fintechs. One great example is Chiper. You find small stores across every neighbourhood and they’re digitising now which in turn can act as a channel to distribute their products.

I truly believe non-financial services will gravitate towards becoming fintechs and the more we see technology like embedded finance and open banking enter the region, the faster the change will take place.

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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