INTERVIEW: Michaela KOLLER, Director General, Insurance Europe
Michaela KOLLER: It is an interesting period because this is the last semester that European institutions can finalize any pending legislative proposals. Anything that is not finalized by February next year will essentially be postponed until the next European Commission's mandate and the next European Parliament.
This postponement can last for at least a year, if not longer. And, when the new Commission does come in, it is free to decide whether it wants to continue postponed initiatives or not. As such, there is always a question mark over everything that is pending.
The Austrian presidency of the Council of the EU, and the future Romanian presidency, will essentially be charged with closing off the legislative mandate of this Commission, Parliament and Council.
On the upside, this means we face an interesting period. On the downside, there is a lot of pressure on the legislators to finalize files quickly. This means that the primary focus may not always be on quality, but more on just getting deals done. Therefore, during this period, we need to engage with policymakers to stress that the quality of legislative texts really matters.
We also need to ensure that the legislative initiatives discussed at European level are actually implementable at national level, and that companies can comply with the rules in a straightforward manner. This avoids compliance issues and ensures that the consumer can ultimately benefit from what is being developed at European level.
In insurance, we have several open issues. These include the pan-European personal pension product (PEPP), the ongoing 2018 review of Solvency II and a number of Level 3 measures for the packaged retail and insurance-based investment products (PRIIPs) Regulation. Last but not least, we have seen the launch of the Motor Insurance Directive (MID) review, which most likely will not be finalized during this Commission's mandate.
XPRIMM: Could you provide an update on the MID review?
M.K.: The MID has proven to be an efficient instrument for the protection of road users over the years and it has contributed to making freedom of movement a reality across Europe.
We therefore welcome the European Commission's efforts to ensure the MID carries on playing this role by providing adequate protection for victims of motor vehicle accidents and ensuring motor insurance policyholders are all treated fairly and without discrimination.
We also agree with the Commission's assessment that the MID as a framework is also fit for purpose for highly and fully autonomous vehicles, which will hit Europe's roads in the years to come.
On the other hand, however, we have some concerns about the proposed new scope of the MID. Specifically, we believe that accidents resulting from agricultural, construction, industrial, motor sports or fairground activities should not be included within the compulsory MTPL insurance cover, and that the defining factor for the scope should be the use of a vehicle in traffic. We are also concerned about the Commission's proposal to standardize claims history statements. This would involve compliance efforts for insurers without any clear added value in practice, and to solve an issue of which there is scarce evidence.
Of course, motor insurance is a key product for insurers in Europe, as well as motorists, so we want to make sure we get the best possible outcome from this review.
XPRIMM: How would you describe the role that Insurance Europe plays at European level? What is the relation with national associations?
M.K.: We have a robust and constructive relationship with our members. First, they see us as the European body that provides insight and updates on regulatory developments. Second, we provide a platform for members to exchange views, and based on this collective market experience we can develop a joint position for the industry. We have managed over recent years to work very effectively with members, who provide excellent input and feedback.
Our governance structure is now working well to bring out the best input from different markets. For example, in the case of the MID review, we have had 24 markets fully engaged and providing input to our position on this important topic. Due to this level of engagement, we can bring a substantive view, and really say that we speak for the whole insurance market in Europe.
I think our members feel that Insurance Europe does its best to bring their arguments forward in the legislative process, as well as in discussions with bodies such as EIOPA and in more informal debates.
XPRIMM: Insurance Europe has announced that its Conference in May 2019 will be in Bucharest. What was the rationale behind this decision and what expectations do you have for this 11th annual conference?
M.K.: The location of the conference is decided at the very top level, in our Executive Committee (ExCo). The whole process begins when members volunteer to host the event, and then present their proposals to the ExCo. These proposals include the level of support that the markets can bring, and the reasons why other markets might find it interesting to visit their market. When our Romanian member, UNSAR, presented its bid, it highlighted that, if it was chosen, it would become the first central or eastern European (CEE) state to host the annual conference. In addition, it pointed out that UNSAR celebrates its 25th anniversary in 2019 and during this period Romania will hold the EU Council presidency. Given these points, there was an almost unanimous decision to organize the event in Bucharest. There was also a desire from other members to show solidarity with CEE markets in general and to take a closer look at how things work in the region. This is because host markets often use our conference to showcase both the challenges they face and also the strengths that they have developed in their market.
XPRIMM: How to you see the European insurance landscape? What are the differences between more mature insurance markets and those that joined the EU at a later stage?
M.K.: In our ExCo, we have particularly good attendance from the CEE markets. When you listen to the debates at this level, you cannot detect a difference between more established markets and others, such as the CEE markets, which have joined more recently.
Sometimes we can see a slight difference at a more technical level. This can be attributed to the fact that most CEE markets have smaller insurance associations, which in turn have limited resources and therefore a more limited capacity to engage on certain topics. As a result, they cannot always send people to all of the discussions that we have. But at the ExCo level, there is always very strong CEE representation.
XPRIMM: What are the opportunities and challenges that European insurers will have to face in the next few years, in your opinion?
M.K.: Opportunities and challenges — aside from the regulatory landscape — include digitalization, competitive pressures, new developments such as cyber risks, and challenges from natural catastrophes.
From a regulatory perspective, we have identified several significant challenges. A major area of focus is the prudential treatment of long-term products under Solvency II, which currently makes it needlessly expensive for insurers to make the long-term investments that underpin their long-term products. We hope to have an opportunity with the next Commission, and during the 2020 Solvency II review, to address this problem.
Moving to conduct of business issues, both the Juncker and Barroso Commissions developed a number of legislative texts that were intended to help consumers. Unfortunately, we are concerned that in several cases this objective has not been fully achieved. This is because many of the texts are not very clear and some are even duplicative or contradictory. This results in compliance issues and consumers being overloaded with paperwork that we don't believe will help them to make informed decisions — or our products more transparent. Therefore, we will work to rigorously address inconsistencies and overload problems and, at the same time, to address all the compliance risks that have resulted for our companies from these initiatives.
XPRIMM: Underinsurance has emerged as a major topic for societies at large. How does Insurance Europe see this topic and what actions has it taken in order to tackle it?
M.K.: This is an issue of vital importance. For example, often when you compare the total number of people suffering from the devastating effects of natural catastrophes with the number that have purchased adequate insurance protection, the percentage that are sufficiently insured is very low. Our role here is to support the ongoing efforts at national level. Underinsurance must be tackled as closely as possible to the individual consumers. Therefore, we support the efforts that are undertaken both by insurance companies and by national insurance associations. While we are not close enough to the consumers to work directly in improving the uptake of, for example, natural catastrophe coverage, we can certainly work with legislators to increase awareness of these perils and the need for citizens to gain appropriate protection against them.
XPRIMM: What interactions take place between national insurers' associations in Europe and Insurance Europe in order to overcome underinsurance and increase insurance penetration?
M.K.: Insurance is a system based on solidarity, so the key ingredient is trust. For that, we need to be supported by governments. For example, after the EU accession of some CEE countries, several insurance companies launched second pillar pension products in those markets. The uptake was good because people had confidence in the brands. But a couple of years down the road, governments in some of those countries tried — and sometimes succeeded — in nationalizing these systems. This is incredibly damaging to the trust that you need to build up in solidarity-based systems. These are the things that we can obviously address with the legislators and through supporting national insurance markets.
XPRIMM: A message for the Romanian insurers, the Romanian Government and for the society at large?
M.K.: We hope to see many Romanian insurance companies at our conference next year. We hope to engage actively with them, to share experiences and knowledge, and to support them in building up their insurance markets.
We see this is an opportunity to put Romania on the map. It would be great if this is picked up in Romania — and also in the CEE markets — as an opportunity to get the voices of the markets heard.
XPRIMM: Thank you!
Interview conducted with the support of UNSAR - The National Association of Insurance and Reinsurance Companies in Romania.