Romanian life insurers closed 2010 with a 2.32% GWP growth rate, up to RON 1.66 billion (aprox. EUR 396.4 million) as compared to 2009 figures. In terms of profitability, although the consolidated financial result of the 23 life insurers was 150% less than in 2009, it still amounted RON 195.08 million (about EUR 46.5 million), improving the overall profitability of the insurance market.
The upward trend continued in the first quarter of 2011, at a pace of 3.34% as compared to the correspondant period of 2010, to a total amount of EUR 103.3 million in GWP. Thus, life insurance is currently representing 20.25% of the aggregate amount of the Romanian insurance market. According to the Insurance Supervisory Commission figures, the dynamic analysis of the life insurance GWP shows that the most impressive increases were registered by three of the most “insignificant” lines of business: health insurance, provided as policies linked to life insurance products (growth rate of 92.12%), permanent health insurance managed as life insurance (growth rate of 48.33%) and by marriage and birth insurance line (growth rate of 17.20%). Still, as their overall weight in total life insurance GWP is of only 0.48%, all that outstanding growth rates were not likely to influence the overall life insurance market result. On the other hand, in the “heavyweight” category, GWP for Unit-Linked life products and the annuities insurance line decreased by 10.47%, while the Traditional business witnessed a 13.60% increase.
On the “expenses” side the amounts paid as gross indemnities, maturities and surrender values for life insurance were of about EUR 38.2 million, up by 1.95% on a y-o-y bases. It is worth mentioning that the surrenders’ volume decreased by 1.8%, to EUR 21.5 million.
No news in Top 10 for the first quarter of 2011
Changes in top of the companies are minimal, given that 8 companies in the market have reported positive evolutions. The market leader, ING Asigurari de Viata, comfortably maintains its position, reaffirmed by a 30% share of the life insurance market. BCR Asigurari de Viata continues its positive development, strengthening its second place in the market, through a nominal increase of 7.6% in European currency. The company has underwritten premiums exceeding EUR 21 million, and gained aprox.1.4 percentage points in market share. According to Insurance PROFILE estimates, Alico has also recorded a slight growth, of over 2% more than last year’s first quarter figures. The insurer has underwritten over EUR 16 million and slightly increased its market share to 15.6%.
Out of the Top 10 ranking, one may also note the dynamics registered by the two “youngest” companies in the market that have managed spectacular evolutions in the current economic context: Aegon Asigurari de Viata, which has doubled its gross written premiums volume on life insurance during the analyzed period, as well as the results of Signal Iduna.
Better returns are boosting confidence
“Looking at the first quarter results for life insurance, one can easily see that the increased underwriting volume is accompanied by a decrease in surrenders, and this shows, in my opinion, that consumer confidence in life insurance products is becoming stronger”, recently stated Angela Toncescu, President of the market supervising authority. “People are more and more aware of the specific benefits of the life insurance products, which are happily combining savings and financial protection. Moreover, insurers are currently managing a very good dispersion of risks and quite often they succeed in providing better investment returns on the life insurance policies than other savings products”, she added.
The ISC statistics show, in this respect, that one of the crisis effects was a significant change in the investment options of the life insurance companies, demonstrating a strong orientation towards higher returns. Thus, the weight of the bank deposits in the overall investment portfolio decreased by 12% as compared to the end of the first quarter of 2009, when the crisis influence was still low. In the same time, the share of the Government Securities grew by 4 percentage points, while Undertakings for Collective Investment in Transferable Securities investments gained about 14 percentage points.
A closer look highlights the differences between the investment policies with regard to the Unit-Linked assets and Traditional lines’ assets considered separately. Somewhat predictable, the investment behavior on the Unit-Linked segment is far more risk prone than on the Traditional one. Thus, investments in securities, bonds and UCITS reached a share of 80% of the Unit-Linked assets portfolio, up by 26 percentage points as compared to 2009.On the Traditional side, Government securities are the most appreciated investment, with a gain their portfolio share from 34% in 2009, to 52% in 2011.
A good time to innovate
“For our company, bancassurance has been a driver for success”, recently stated Florina Vizinteanu (photo 1), President of the Directorate, BCR Asigurari de Viata – VIG. Revealing her company successful experience, she explained some of the reasons that made bancassurance, a quite unpopular distribution channel not very long time ago, a reliable growth solution.
Amongst the advantages of the distribution model adopted, she mentioned the process of building the loyalty of the bank’s customers, as well as the opportunity of the insurance company to approach a group of customers with a higher level of financial education. On the consumer’s side – the interaction with a sole provider of financial services able to design a package of investment – savings – protection products that is closely adapted to the customer’s profile. “The secret of success in a bancassurance model is “simplicity”: sophisticated products, but easy to understand, both by the customers and by the bank staff who have to offer them. However, achieving this simplicity requires substantial technical effort and imagination, permanent process and system learning and improvement”, explained Vizinteanu. She also pointed out that “significant changes that have occurred in the last years in the customers’ behavior and needs, so bancassurance products now meet the real client’s needs”.
Beside the different needs of a new generation of customers, the bancassurance impetus also was driven by the reborn interest of bank towards a previously ignored source of business.
“The lending activity downturn have co-interested banks in obtaining additional revenues through bancassurance partnerships and have brought in the banking environment the willingness to make the necessary effort so that the partnership operates at optimal parameters”, emphasized Silvia Sirb (photo 2), CEO, Aegon Asigurari de Viata. This was a decisive change, as “bancassurance is a demanding model that requires high standards of professionalism and uses the most important qualities of the banking partner and the insurer. The bank’s commitment to the success of the partnership, at all levels, but above all at top management level, is essential for the success in bancassurance”, she emphasized.
Perspectives
According to the most recent Mednet survey conducted in partnership with Media Xprimm, Asibus 2010, around 25% of Romanians plan to buy life insurance in the future. Out of this percentage, about one quarter of them referring to an immediate purchasing intention. Inhabitants of Bucharest are ready to spend about EUR 225/year for a life insurance product, while for the people living outside the capital the sum lowers to about EUR 125/year. The survey also shows that people who are most determined to buy life insurance are those who already use other insurance products.
On the other hand, as Cornelia Coman, CEO, ING Asigurari de Viata recently stated, “when it comes to signing a life insurance contract Romanians are dissuaded by the amount of money available to pay contributions, considering salaries are lower and inflation is high. In addition, job insecurity is another reason for their hesitation”. Nevertheless, an ING research revealed that over 90% of Romanians want to improve their financial power. More than this, insurers are already considering the new generations’ needs. “We are dealing already with a new type of customer, but we need to prepare ourselves for very rapid changes as in a few years we shall face a very different public: the “Twitter’s children” generation of today will give our customers of tomorrow”, Florina Vizinteanu said.
