Make the Most of the Mexico-bound

Auto coverage essential; homeowners a growing market

Recent snow and rain at many people’s doorsteps signal that it’s the high season for snowbirds to flock south for the winter. And those driving beyond the border into Mexico during this peak season should seek out auto insurance. Some agents are capitalizing on this coverage need — despite the maturing market. Meanwhile, industry insiders say market developments in other lines of coverage have increased the need for Mexican insurance.

Ample Activity

Statistically, there’s never been a better time to reach out to customers, according to U.S.-based insurance agents and brokers who offer Mexican coverage. “Millions of Americans travel to Mexico for the holidays and spend two to three weeks there, often with their families on that side of the border,” said Jorge Cacho-Sousa, chairman and CEO for MexiPass Global Assurance International Insurance Services.

According to U.S. Census Bureau statistics, Hispanics represent the nation’s largest minority group, totaling 44.3 million people. This group accounted for almost half (1.4 million) of the United States’ population growth of 2.9 million between July 2005 and July 2006, when the Census tallied its most recent survey. The states with the highest Hispanic populations are California, followed by Texas, Florida and New Mexico.

Mexican law stipulates that any driver in the country who fails to contract insurance can be fined and imprisoned from three to 10 years. Drivers are unlikely to get stopped to provide proof of auto insurance. However, if a driver is involved in an accident, he or she must provide proof to the Mexican authorities that funds are available to respond to damages.

“If you don’t have an insurance policy issued by a Mexican insurance company, the only other way to show you can respond is with cash, or be detained, which is not going to be a pleasant experience,” Cacho-Sousa said. Also, drivers who rent cars in the United States are unlikely to get approval to take the rental into Mexico unless they have proof of Mexican insurance, he added.

To secure Mexican auto liability insurance, travelers bound for Mexico must get a policy written by a Mexican underwriter. Drivers can purchase limited coverage at the border. But for a policy that’s more consistent with U.S. standards — that covers passenger liability, uninsured motorists, medical payments, comprehensive and collision — insurers on the U.S. side of the border have developed relationships with Mexican insurance companies to sell policies to tourists taking their cars into the country.

Several insurers, including American International Group (AIG), Chubb, Zurich, Ace, GE Capital and GMAC provide Mexican coverage. Smaller companies also offer coverage, so agents and brokers should carefully select a carrier to work with, Cacho-Sousa said. “In the U.S., we have thousands of insurance companies. In Mexico, there are probably only 50 — some large, some small, some good, some bad.”

Day by Day

Mexican insurance policies in the United States are sold on a per day basis up to about 30 or 35 days, according to Floyd Woods, a marketing director for Mexico Insurance Professionals (MEXPRO), a division of the International Insurance Group Inc. If the purchase is made for a greater number of days, a six-month policy sometimes is issued to the customer. If coverage for 40 to 45 days is required, the pricing and coverage for an annual policy kicks in. Some companies only sell per-day policies up to about the 45-day mark and then will sell the policy as an annual.

Some insurers charge extra for cancellations, endorsements or changes to the policy, emergency roadside services and legal aid, but many companies will include those services in a typical policy. Additional coverage is available through an enhanced travel assistance endorsement for a nominal fee, Woods said.

While not every automobile traveler to Mexico buys auto insurance, they really should, Woods said, and the responsible people do. “If you go down to Mexico and you don’t have Mexico insurance there’s a possibility you may never come back,” he said. “Because you could go and have some catastrophic, disastrous accident. They throw you in jail and they impound your vehicle. And until you can come up with the money equal to the damages you incurred or inflicted, you’re going to sit there.”

Sales Heading South

Despite the seeming need for Mexican coverage, agents and brokers say they’re seeing a sales slowdown this season. Economic and political issues are possible reasons fewer drivers are going into Mexico this year.

“There aren’t significant reductions,” Cacho-Sousa said, “but people talk about the high price of gas as one factor that sales are a little down. Another factor is that when you drive into Mexico now, you are required to have a passport. Before, people could just cross the border with a U.S. I.D. or driver’s license.”

Another reason sales are more difficult to come by is that there is more competition among those offering coverage. More carriers and agents have entered the market. “Some people are selling coverage directly online, and there are some insurance providers that have become direct writers as well,” Cacho-Sousa said.

RV Ruling

Recreational vehicle caravans into Mexico traditionally have been an important component of the Mexico insurance equation, but new railroad requirements are affecting insurance sales. The Chihuahua al Pacífico Railroad that runs through the Copper Canyon in northern Mexico has played a big part in the Mexican insurance market, MEXPRO’s Woods said. But the railroad recently changed its policy toward RVs.

In the past, the train allowed RV owners to pull their vehicles onto one of the train’s flat cars and stay on their RVs for the duration of the train trip. It has been a popular destination for RV caravans, Woods said. However, the railroad no longer allows RV-ers to remain on their vehicles, requiring them instead to buy space in the passenger car for themselves and their pets, in addition to paying for passage for their RV.

Woods said his company has relationships with two of the four RV caravan tour companies that operate from the United States, and they report sales are down with the change. Traditionally one company might have taken 14 caravans on the train during the winter season, with 20 to 30 RVs per caravan.

Woods said caravan companies are working to sell their RV customers other destinations, such as Zacatecas or Guadalajara. Still, sales were off by 40 to 50 percent in September.

Coastal Coverage

Despite the entrance of more players in the Mexico insurance market, Woods said prices have remained stable. And, new sales opportunities are on the horizon, particularly in homeowners insurance, said MexiPass’ Cacho-Sousa and Juan Buendia, vice president and partner at MacAfee and Edwards Mexican Insurance.

Mexico is an attractive area to purchase property because coastal property is significantly cheaper than it is in the United States. “People can buy beachfront property for under half a million (dollars), which would be impossible in California. The same property that would cost $10 million in Laguna Beach (Calif.) you can get for $1 million in Mexico,” Cacho-Sousa said.

Buendia agreed, and noted that securing financing for Mexican properties has become easier, increasing the need for homeowners’ policies in Mexico.

“More U.S. banks are offering mortgages to Americans to buy their vacation or retirement homes in Mexico,” he explained. “In the past, only a handful of banks were offering their mortgages.” As financing becomes more available to purchase properties abroad, mortgage companies are requiring insurance, he said.

Insurance for Mexican coastal properties faces the same challenges as for U.S. coastal properties. Some carriers will only write new business if houses are protected for hurricane and flood, such as having hurricane shutters, Buendia said. “Underwriters are asking a lot more questions such as how high is the property from the water, what protection is there from a water break and how is the property constructed?”

Yet even with the added scrutiny, “a lot of people are buying great properties in Mexico,” Cacho-Sousa said. “There are some communities that are pretty much populated by American retirees and it’s like being in a U.S. town. And in places like Cabo San Lucas, you see $20 million mansions because anyone who’s worth anything in the world has a multi-million-dollar vacation home there.”

With those trends, Cacho-Sousa said he tries to educate agents that Mexican insurance is an important product to offer. “Agents have the opportunity to offer a quality policy for their clients. People travel to Mexico from every state and from Canada. … If agents don’t offer these people policies, they will buy from someone else.”

Topics USA Carriers Auto Agencies Property Mexico