1. Was 2014 a milestone year for the Romanian insurance industry? Please detail.
The landscape of the Romanian insurance market demonstrates that 2014 was a ‘milestone’ for the insurance industry. Now it all depends on how well we have learned our lessons and on the next steps made by every actor on the market in order to maintain the customers’ trust in the insurance industry. I have said this in numerous other occasions: the clients’ trust is essential for the insurance industry. In order to maintain that trust we, all the actors on the market have to act with responsibility and to promote a fair and accurate image of the insurance market. This is, in my opinion, the main issue we have to focus on. 2014 was indeed a turning point, a strong signal that the market cannot continue on the same path and some changes have to be done.
2. As the leader of the Romanian insurance industry, how was 2014 for Allianz-Tiriac Asigurari?
2014 was a year with positive results for the company – Allianz-Tiriac confirmed the profitable growth trend of its insurance business. The GWP (gross written premiums) increase was accompanied by the increase of the operational profit – these are results that confirm we are on the right track and our strategy based on the idea of profitable growth works. To put it simple: we managed to grow profitably, to keep our promises to our customers and to remain a stable partner for our clients. Allianz-Tiriac ended 2014 with 990.8 GWP (line and non-life), posting an increase of 7% as compared to the previous year. The positive evolution of the gross written premiums was doubled by the improvement of the operational profit from insurance business, which posted an increase of RON 21.6 million as compared to 2013.
The stability of the company was also confirmed by the BSR (Balance Sheet Review) – a test carried out by the Financial Supervisory Authority, meant to evaluate the assets and equity and liabilities of the insurance companies – which showed the company’s financial strength to fulfill any promises and obligations towards our partners in any given moment. The company is also fully prepared for the implementation of Solvency II starting with January 1st 2016.
2014 was also a year in which the clients and the market confirmed to us that our strategy pays out and that we are considered a trustworthy partner – at the beginning of the year we received the ‘Insurer of the year’ award from Xprimm and we were awarded the distinction ‘The most trusted insurance company in Romania’ by Reader’s Digest within the Trusted Brands Study. These two awards we received, together with the fact that, for the 8th year, Allianz- Tiriac remained loyalty leader represent important achievements for our company this year, because they are directly linked to the quality of the products and services we provide to our customers and confirm it once again.
The secret of our success in 2014? The main factor which has a great contribution to the success of an insurance business is and should be the prudential approach and the financial stability of the company. This prudential approach means that we engage in business we can efficiently manage to our and our clients’ highest satisfaction.
3. What are the major vulnerabilities of the Romanian insurance industry? What are the main strengths?
We can certainly point out some vulnerabilities of the insurance industry that have to be addressed as quickly as possible. First of all, there is the lack of trust of the clients in insurance companies, a phenomenon mainly due to the fight for market share at any cost, that generated the events of the past years. This problem has to be quickly addressed in order to restore the customers’ trust in the insurance market and it is the responsibility of all the actors involved.
The second biggest challenge the insurance market has to cope with is represented though by the implementation of Solvency II starting from January 1st. From this perspective, Allianz-Tiriac is prepared for the implementation of Solvency II, capable to fulfill all its commitments towards its clients.
4. When was the turning point of the Romanian insurance industry after the crisis? Do you rather see a fast recovery and growth or a sluggish growth? What are the reasons?
In 2008, the Romanian insurance market reached a historical peak. The decrease of the market has begun in 2009 and since then, every year came with new challenges. We are also talking about a market dominated by motor insurance, a market that has been constantly recording losses for nine years. This is a reality we have to deal with. One of the factors that contributed to the contraction of the market was also the collapse of the leasing market in 2009, which also influenced the insurance market, since it is dominated by motor. Moreover, the car fleet was getting older, a trend which influenced the Casco segment evolution. Counterbalancing this decrease was not a simple thing to do. I would say that we can expect a sluggish growth rather than a fast recovery. We could notice an increase on certain lines on the market, for example on the health and life insurance segment if certain fiscal incentives are granted. In 2015 we were glad to see the increase of the deductibility limit for the private health insurance up to EUR 400. This was an important step, but, in our opinion, there is much more to do in this respect in order to stimulate the growth of other insurance lines of business.
5. How do you see the competition on the insurance market?
The insurance market is still a soft market, dominated by a high price competition, especially on Motor. The customers are still looking for the lowest price, especially for the mandatory insurance. This is good, as long as the companies are providing a service which satisfies the customers. The quality counts as well. We have to strive to educate the customers to take into consideration the entire picture, namely the price and the quality (coverage and services). Taking the actual situation into consideration, we have to strive for quality, namely, for better products and services. All regulations and laws need to be fully respected and with this, the future will bring even more transparency for the customers. This is good and absolutely contributing to a fair and transparent competition. With Solvency II, the innercompany’s financial will be communicated much stronger. Clients should know about wording, prices, commissions and the financial situation of their insurance company much more when they take their purchasing decision. The competition should be about coming up with the best possible product or with an innovative service which makes the clients’ life easier. We have to struggle to remain a stable and trustworthy partner. This is a joint responsibility, on the long term. Singular activities are not enough, there has to be a constant effort to educate the market, the clients. For years, Allianz-Tiriac has been promoting the idea of the right price for the services provided and this is a strategy.
6. According to official statistics, the disposable income in Romania has increased in 2014 and in 2015, as well. Have you seen more appetite for insurance products? Furthermore, we ar e expecting a major tax shift regime from 2016 (the VAT decrease). Do you expect some of the disposable income to be redirected to insurance products?
Normally, an increase of income should reflect in the amounts spent on other services, such as the insurance product. However, we might not see an immediate effect, in spite of an increase of the income, there might be a delay until the supplementary income might be invested in insurance. This has also to do with the lack of understanding their need of insurance. People have insured the cars in a better way than their lives or properties. Therefore, it is important to educate the customers how to choose an insurance policy, not only based on the price, but also based on the services provided to them and ultimately, based on the stability of the insurance company.
7. On a scale of 1 to 10, where does Romania stand in terms of convergence towards the EU average when it comes to the insurance industry?
The Romanian insurance market is a market full of contradictions: there is a clear need for protection, but what we can easily see is a low penetration degree of the insurance products and a clear domination of the motor lines. In 2014, the penetration degree was round 1.21%, posting a decrease as compared to the 2013 level of 1.29% , respectively 1.41% in 2012, according to public data. There are certainly gaps between Romania and the situation in the EU in this respect. The penetration degree in Romania is one of the lowest in the CEE region (as compared for example with The Czech Republic – 3.7%, or Hungary – 2.8%). There are also other gaps between Romania and the EU in respect to the insurance industry situation. The insurance density for example (EUR/ inhabitant) is also one of the lowest in Europe – 93 in 2014, as compared to the European average of 1,900. Moreover, we can also notice a difference between Romania and EU in respect to the weight of the life insurance in the total GWP. For example, in Romania, the FSA (Financial Supervisory Authority) information for 2014 reveals that the life insurance has a weight of round 20%. The Romanian insurance market is, as said before, dominated by the non-life (motor) insurance, as compared for example with Poland and Hungary, where the proportion between non-life and life is almost 50-50. Therefore, to conclude, in terms of convergence, towards the EU average, on a scale of 1 to 10 we stand at 3-4.
8. How would you describe ‘a good year’ for Allianz-Tiriac Asigurari and for the Romanian insurance industry?
A good year is one with positive results for all our stakeholders. Customers come first and need to be satisfied with all we deliver to them at any moment. This is what we understand as a solid partnership between the insurance company and the client. We believe in the best services for the client. A good year is when we keep our promises and manage to remain a stable partner for our clients, partners and other stakeholders. And by stable I mean financially stable, capable to fulfill all its commitments.