Introduction
This is my first article in this space, and I aim to share the perspective from which I will address financial topics that impact millions of Mexicans every two months. Over time, I have learned that financial services are not just about institutions or products; they are about people and the opportunities they can bring to their daily lives. Therefore, in this column, I will discuss both the evolution of financial services in people’s lives and what happens daily in the economic environment that can directly affect consumers.
What is Financial Inclusion?
Financial inclusion is often thought of as opening more accounts or distributing more cards, but it’s actually a gradual process. It begins with a money management account and progresses to payment and credit options that expand possibilities, eventually incorporating products that protect assets, such as insurance.
The Relevance and Underutilization of Insurance in Mexico
Despite their importance, insurance adoption remains low in Mexico, with only 23% of the population having some form of coverage. This is not a coincidence. Many families live paycheck to paycheck with limited income, making it seem like a luxury to allocate part of their budget to an insurance premium. However, there is also a significant component of ignorance: 33.8% of people believe they don’t need it, 15.2% consider it too expensive, and 13.6% don’t understand how it works. The challenge is not just economic, but also educational.
Why Insurance Matters
Insurance doesn’t prevent accidents or illnesses, but it does prevent an unexpected event from turning into a financial crisis. When families understand this with simple information, clear examples, and real-life cases, their perception changes. Prevention stops being seen as an expense and starts being understood as a tool to maintain financial stability.
Case Study: Life Insurance
Consider a common scenario: a family’s breadwinner falls ill and passes away, leaving the family without income. The family not only faces funeral expenses but also risks losing their home and having to drop out of school for work. With an accessible life insurance policy, costing as little as 100 pesos per month, immediate expenses would be covered, and the family would have economic support to reorganize without losing everything. This is the true value of insurance: preventing an unexpected event from destroying years of hard work.
Adapting to Mexico’s Reality
Mexico needs models that adapt to the reality of those living with variable or tight incomes, such as microinsurance. These offer coverage and premiums in line with payment capacity. However, even these products alone don’t solve the challenge; only 15% of people have one. What’s missing is consistent financial education, with clear explanations of benefits, coverage, and procedures to build trust.
Combining Flexible Products with Clear Information
By combining flexible products with clear information, we can move towards broader and genuine protection where insurance becomes a natural part of any household’s financial life, no longer seen as a distant luxury.
About the Author
(*) General Director of BanCoppel
Key Questions and Answers
- What is financial inclusion? Financial inclusion is a gradual process that starts with managing money, progresses to payment and credit options, and eventually incorporates protective products like insurance.
- Why is insurance underutilized in Mexico? Insurance adoption is low due to limited incomes making premiums seem like a luxury and significant ignorance about their importance, cost, and function.
- How does insurance help families? Insurance doesn’t prevent accidents or illnesses but prevents financial crises resulting from unexpected events, providing stability and support for reorganization.
- What models of insurance are suitable for Mexico’s reality? Microinsurance models that adapt to variable or tight incomes, offering coverage and premiums in line with payment capacity, are suitable.
- What is missing to increase insurance adoption? Consistent financial education that clearly explains benefits, coverage, and procedures is essential to build trust and encourage insurance adoption.
