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. We have to acknowledge that the development of the insurance sector in Romania is lower as compared to other countries in our geographical area. The public data published by the Financial Supervisory Authority (FSA) show that the insurance density in Romania is one of the lowest among EU countries.
The evolution of the insurance density in the first semester of the year between 2011 and 2014 (ratio between gross written premiums in Euro and the number of inhabitants) reveals that the insurance density in the first semester of 2014 is below the one registered in the similar period in 2011. And, as we said before, the insurance penetration rate is low as compared to the protection need. We are exposed to catastrophic risks (earthquake and floods), but many households exposed to these risks are not insured, the owners do not even have the mandatory household insurance (PAD). If we take a look at the evolution of all the lines of business, we will notice a slight increase on the MTPL segment in the first six months of 2014 (on the market level), but a decrease on the property segment (of almost 25%) as compared to the similar period of 2013. This should not be a surprise since we all know that the Romanian insurance market is clearly dominated by the motor lines of business.
Unfortunately, these lines are also the ones generating the aggregated loss which has been recorded for years. We can also clearly notice a decrease on the property segment, where the line “fire and other natural catastrophes” posted a nominal decrease of almost 25% as compared to the similar period in 2013. This decrease in GWP on this line can be considered a consequence of the legislation change in respect to the mandatory household insurance, therefore cannot be necessarily considered a negative evolution. The segment where we can also notice a decrease of about 25% in the first six months of 2014 is the unit-linked (investment) life insurance segment.
The reality is that the amounts spent on life insurance (more specific on protection and financial planning) by a Romanian citizen are still very low. From this point of view, there is a huge growth potential on this segment, but, as we stated before, some fiscal incentives (deductibility) might boost the development of this segment. From our perspective, there is also a need for the market education in this respect, in order for people to better understand the benefits of a life insurance policy and the way it really works.
There are, on the other hand, some image issues that, inevitably, affect the public confidence. In my opinion the situation can be solved if - and only if - every “actor” on the Romanian insurance market acts responsibly, and by that I mean that every insurance company and the other institutions involved put the client’s interests first. The insurance business is based on trust. It cannot exist without this trust. And the trust of the client can be obtained and maintained only if the insurer is right there when the client needs him and only if the insurer remains a trustworthy partner through the years.
Being a trustworthy partner means that you should be financially strong and stable so that the client can trust you will be there and you will pay the indemnities when the risk occurs. The companies have to assume their part of responsibility and to be solid partners. The trust is built in time and can be lost very quickly, therefore there has to be a permanent effort from our part. There should always be a great concern for the clients and for keeping their trust. And I have to say their trust depends on our performance in terms of products and services and on our financial stability.
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 take only the risks we can efficiently manage. This is a guarantee that if the risk occurs we are able to pay the due indemnities. Also keeping fair price levels, rigorously correlated with the risks taken, and the quality of our products and services is another factor which influences the success of an insurance company on the long run. And we are stating this based on 20 years of experience on the Romanian market. This was a winning strategy for Allianz-Tiriac, ensuring our top position on the market, not only in terms of GWP, but also in terms of customer loyalty.
Our business is based on people’s trust. To keep that trust we have to keep our promises and be there for our clients when they need us, thus fulfilling our obligations. In all the 20 years of activity we have been striving to build solid partnerships with all our clients and to keep the company financially sound so that our clients and partners could rely on us in an unstable economic environment.
The drivers for Allianz-Tiriac’s business in the first six months of 2014 were represented by the non-life insurance segment. Overall, we recorded positive results, namely an increase of around 6% as compared to the similar period of 2013. The non-life insurance segment was the main contributor to this positive evolution. We also noticed a positive development on the non-motor non-life segment, due to the health and travel insurance segment which had a significant contribution to this trend. For example, the income from health insurance almost doubled, amounting to over RON 9 million in the first six months of 2014. We could see a high interest for the health insurance which means people are beginning to see the real use and benefits of this type of insurance.
Overall, our half year results are in line with our initial estimations, even a little bit above our projections. Therefore, we are optimistic that in 2014, an anniversary year for the company (this year, Allianz-Tiriac celebrates its 20th anniversary), we will achieve consistent results, in terms of income and profitability. And what is more important, our clients and partners can be sure we will keep our promises, this year and in the years to come.
