Zoran BLAGOJEVIC: The Serbian insurance market is stable and growing but the growth is slow and insufficient for the insurance premium to have a bigger share in the gross domestic product, which is one of the main indicators of the level of market development. At this point in time we can talk about the results in the third quarter of 2018, where total premium of insurance market increased by 5.19 per cent. Considering the 4-5 per cent growth of Serbia's GDP, insurance is clearly not growing as much as it should be. This particularly shows in property insurance where the premium has increased by only 2.6 per cent, indicating that the industry is not keeping pace with the economic growth. The premium has grown in both non-life and life insurance, by 4.6 per cent and 6.3 per cent, respectively. Considering that by the end of the year significant fluctuations are unlikely to happen, we can safely say that after last year's 4.4 per cent this will be another year with a modest market growth rate.
XPRIMM: At market level, what are your expectations for the end year and for the new year?
Z.B.: Insurance is a conservative industry, and since the Serbian market is underdeveloped it cannot change drastically over a short or a medium term. I expect the trends we have seen in the past few years to continue. By this I mean stability, a modest increase in the premium, and consolidation that has been happening in Serbia over the past few years resulting in the number of companies to drop from 25 to 17. In the forthcoming period, an additional challenge for the market will be to adjust to the increasingly demanding regulatory requirements both at the local level and in the context of adjusting to the European regulations on Serbia's path to the full EU membership.
XPRIMM: How would you comment on your company's evolution during 2018?
Z.B.: To us, this was quite an important year for a number of reasons, the most important one being 15 years of successfully doing business in Serbia. For a decade and a half now Wiener Staedtische Osiguranje, a greenfield investment of the Vienna Insurance Group, has been justifying the trust of its main shareholder.
This is the first full calendar year of doing business since successfully acquiring AXA insurance companies last year. The effects of the merger are evident, not only in the premium but also in how we organise the work of our team that has secured our growth in almost all lines of business. It is still early to talk about annual results but I can say that I am pleased with what we have achieved in the first three quarters of 2018. Our premium has increased by 8.8 per cent, exceeding the market growth. This is thanks to non-life insurance, which has seen an impressive 19.9 per cent increase in the first nine months of the year. In this segment, property insurance increased by 16.9 per cent, which is a very good result considering that our positioning was already good in this part of the market. Voluntary health insurance has increased by nearly 53 per cent, Casco insurance by 23.1 per cent and motor third party liability by 19.44 per cent.
XPRIMM: What are your company's future development plans?
Z.B.: The plans of Wiener Staedtische Osiguranje are centred around Agenda 2022, a new five-year plan that we have adopted and started implementing this year. This is a comprehensive strategy that should provide a basis for the realisation of our business plans and for a more significant penetration into the small and medium enterprises (SME) insurance and private property insurance markets. At the same time, the strategy defines the direction of the future digital development of our company. This will ensure faster and more efficient communication with the users of our services and optimise internal processes with a view to automating and better organising our work. When it comes to corporate social responsibility, as the only insurance company in Serbia with its own contemporary art collection, we will strive to support the arts even more.
XPRIMM: Motor insurance holds a significant share in the Serbian insurance market's portfolio. How would you comment on the motor insurance lines' evolution this year?
Z.B.: Motor third party liability has seen a premium growth of 5.6 per cent in the third quarter of the year. With its 33.88 per cent share, it is still a dominant segment on the market. This should not come as a surprise considering the underdeveloped insurance market in Serbia on the one hand, and the mandatory aspect of this type of insurance and a diverse distribution network on the other. We expect that the new legislative framework and its announced strict implementation will help better regulate this segment of the market.
XPRIMM: As far as we know a series of regulatory changes are in preparation for the MTPL insurance class. What are your expectations with regard to their impact?
Z.B.: When it comes to MTPL, we are heading towards important years. We expect a new law on mandatory traffic insurance to be adopted by 2020. It should regulate a number of issues of importance for both the insurance industry and society as a whole. Our legislation needs to be harmonised with the EU regulations and make it possible for our market to safely make two big steps: liberalisation of MTPL prices and increase limits for damage payments. These are going to be great challenges for the Serbian insurance market because we see that limits are constantly growing in the EU due to growing salaries and higher health care costs. However, our neighbouring countries' experience is warning us about the possible consequences of the liberalisation of MTPL prices. One of the effects of significantly lowering the premiums in these countries was that many people who were working in insurance have lost their jobs. The MTPL market liberalisation needs to happen in such a way that the insurers are able to cover the risks. The process we are facing is certainly going to test us all but I personally expect the insurers to act responsibly.
XPRIMM: The Serbian market is one of the CEE markets with a rather modest coverage degree in home insurance. What are the main reasons behind this situation? Are there, in your view, any solutions to narrow the protection gap that may be used and were not enough taken into consideration?
Z.B.: A number of factors hinder the penetration of private property insurance. First and foremost, it is low public awareness of the importance of insurance. Insurance in Serbia is perceived as an expensive service although it really is not. This puts a great responsibility on all the players on the insurance market to educate people and raise the awareness of the importance of insurance. At an annual level, this can be a tall order bearing in mind the average flat insurance premiums in Serbia.
XPRIMM: Life insurance accounts for almost a quarter of the market GWP. Yet, official data are providing very few details about this line of business. Please give our readers your comments on the life insurance market's structure and evolution.
Z.B.: According to the latest published data for Q3 2018, the share of life insurance in the Serbian insurance market is 22.7 per cent. Compared to the same period last year, life insurance premium has increased by 6.37 per cent. The share of life insurance in the total premium has dropped from 25.9 per cent at the end of 2016 to 24.4 per cent at the end of last year, indicating that the downward trend will continue. There are 17 insurance companies in Serbia, 10 of which are in the life insurance business. Bearing in mind the BDP growth and the underdeveloped life insurance in Serbia, market players cannot be pleased with the level of growth achieved so far. Term life insurance is the most common insurance plan on the life insurance market as a life insurance policy is a mandatory means of securing a bank loan. Mixed insurance savings plans are less common. In addition to the basic insurance products, the market also offers supplemental accident insurance, supplemental critical illness insurance and supplemental surgical insurance plans. Serbia has adopted a trend seen in developed countries for a while now and this year it has introduced unit-linked life insurance. Wiener Staedtische Osiguranje is the only insurance company in the country that offers this type of product.