News - THE ROMANIAN INSURANCE MARKET NEWSLETTER
No. 133, May 21th, 2009
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A Romanian saying sounds like that: "Who got burned once, will try
to cool even the yogurt!", and an Anglo-Saxon one goes like this: "Better
safe than sorry". The two proverbs translate in words a different
attitude towards risk, even if, in both cases, the message is clear:
Basically, the Romanians became cautious only after passing through a negative experience, while for the Englishmen, caution is the premise for their attitude towards life.
Representative is the approach of the central character in the story with the block of salt. Once aware of the possibility of a risk to produce, he cannot react in any way.
There's nothing left to do, so everything is already lost!
For Romania, the block of salt called Vrancea has moved last month. Enough so that all radio and TV stations present the darkest theories, the most disturbing scenarios, the most bizarre figures, the number of potential victims and, last but not least, useful advice in case of earthquake.
Under these conditions, many expected, may be, that insurers would be assalted by those eager to insure their households. It didn't happen like this, nor will this happen too soon, because it is a problem of attitude towards risk. And attitude is the most difficult one to change.
Maybe it would have been better if, during TV debates, along with tips on the emergency kit and on what each one of us should have in the house to use in the event of an earthquake, the talks had also been about ... insurance.
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with Radu MUSTATEA,
Radu MUSTATEA: At this time, it is totally false to say that the effects of the economic crisis are not felt. Regarding the company that I am managing, the economic backfall was felt since the fourth quarter of last year, especially in November and December, reaching a peak in January-February. Starting March, the backfall flatted, at least according to our sales figures.
In terms of effects, the economic crisis is fully manifesting in some specific areas: the growth of the compensations level and the growth of average claim. Also, the depreciation of the national currency was felt in the relationship with the repair shops and with the spare parts providers that are trying, in this period, to transfer costs from other areas on the insurers' shoulders.
Separate from this problem with the repair shops is the situation that affects the leasing area, as many clients no longer pay either the rates, or the insurance premiums.
Another disturbing effect would be the proliferation of fraud cases: clients are torching or crashing the cars, and the insurer bears the compensation. The client gets off the leasing contract and he also receives a sum of money, especially if he paid 50% of the value of the vehicle. If the damage is 80% of the value of the car and the client has paid at least 50% of it, it is normal to receive some money back. But it is very difficult to separate actual cases of damage from the framed ones.
For example, we have now a case in which a car was destroyed by fire just before being recuperated by the leasing company because the customer had not paid the rates. The case raises some question, but it is very difficult to prove an eventual guilt of the client.
Another segment that strongly felt this financial uncertainty is represented by the banking field, which, by slowing or stoping the loaning activity, indirectly affects the insurance sector; based on the credits granted by the banks, insurance companies have offered credit insurance, household insurance, goods insurance and life insurance. In addition to retail, the corporate segment, from which we receive a negative feedback, is also affected.
Besides those listed above, there are other effects: generating unemployment, which indirectly leads to loss of insurance policies, non-payment of rates, limiting car sales etc.
Inspite all these, the company ASTRA-UNIQA registered, during the first three months of this year, an overall increase of the underwritings volume. We had decreases, on some segments, but they were compensated on the other lines of business. Personally, I think the market will increase by 10-15%, if we refer to the national currency.
XPRIMM: What are the main anti-crisis measures to be taken by a manager or by an insurance company in Romania to face both the effects of the crisis and the increasing competition in the industry?
R.M.: There are the so-called guidelines, principles of action for this types of situations, but this financial crisis has no precedent; it had a galloping evolution and I think it will end just as quickly as it started.
I think this economic crisis was felt especially because of the speed with which we operate today in every field. The crisis went from bank to bank, from investment to investment, the insurance companies were also involved in this process, and the erosion over time has led to the collapse of this structure. What saved some companies in collapse was the governmental support that they have been granted.
XPRIMM: Do you consider that this state of financial uncertainty encourages the visionary managers or the innovative companies?
R.M.: Yes, normally, just like in war, you must be innovative, come up with new solutions, because in the current situation if you follow the old lines you are heading for a shipwreck. The guidelines are materialized based on previous experiences, but this crisis is not something that we have faced in the past.
Our company has also applied traditional methods, "cost-cutting" type, but, in parallel, we came along with new solutions: launching new products, discovering new markets, developing on niche markets. My personal guideline is the one of permanent development, in order to compensate losses on certain business segments.
XPRIMM: Which is the development planned by ASTRA - UNIQA or, more precisely, which is the company's strategy for the current year?
R.M.: For example, in this period we have two large projects in the final implementation phase.
The first one is introducing life insurance in the ASTRA-UNIQA portfolio, an area where we had shortcomings in the past. Since last year, we have a new team on this field, which we intend to develop.
In this respect, we created a support system for sales on life insurance: we have now a person specialized on life insurance sales in each branch, that provides support for the sales force. The sales force of ASTRA-UNIQA is specialized in selling non-life insurance, and the reorientation is not an easy one. We had, so far, three such attempts, but now it seems that we will succeed.
The second project will be the equivalent of a real "earthquake" on the insurance market: we want to give to each person working in ASTRA-UNIQA a mobile unit for electronic sale, the size of a wallet. This mobile unit is composed of a mini-laptop with modem and printer, which may issue an insurance policy from any location.
The program is already on-going in Bucharest, applied on about 60 people, and it will be expanded throughout the country. For the insurance market, this is a novelty; sales force is used with extensive usage of pencil or pen, the actual sale of an insurance policy taking around 30-40 minutes, which is quite a lot of time. Of course, this change will be equivalent to the transition from pencil to cosmic rocket, but the sales force must adapt to this trend.
I think this is the future of insurance, it will not be easy, but sales force effectiveness is diminishing the costs, the information comes in real time, price changes are also taking place in real time, without dozens of circulars.
For now, the trainings are taking place only in Bucharest, but they will take place in each branch; in what the IT support is concerned, it is offered by several companies.
In addition to the sales force that will take advantage of this system, the people from the repair shops will also benefit from this innovation. We hope that, by introducing the electronic claims file, we will reduce the time necessary to solve the respective file.
XPRIMM: How long do you estimate it will take for this system to be applied on a national level?
R.M.: Within maximum three months, the system will be extended throughout the country, as the program has already been running in Bucharest for a month. We bought 1.000 such units, and the investment amounted to approximately EUR 1 million. We hope to achieve greater savings compared to the invested amount, besides, we benefit from the ecological side of eliminating paper forms. If, normally, a policy was written in 30-40 minutes, now we hope that it will take about two minutes.
There is also another on-going large project, which is reffering to the quality of the work of the repair shops we work with. Thus, by random check, we will verify: the origin of spare parts, the work quality and the repair time, compared to the price charged by that unit.
Being the first company to implement a full-size system for its sales force in Romania, we hope to provoke a real "earthquake" on the market.
XPRIMM: Implementing the mandatory household insurance is regarded as the big opportunity of 2009. ASTRA-UNIQA has already expressed its intention to enter PAID with the maximum rate allowed. What are your expectations regarding this project?
R.M.: We are the first company that has the approval of the shareholders to participate in PAID, within the limit allowed by law, of 15%. Personally, I think the law comes to fill a gap with a symbolic amount, more than bearable for the owners, which will solve a yearly problem, whether it is the floods or the earthquakes. An insurance system with a viable solution had to appear.
Meanwhile, the service is affordable and everyone should take advantage of it, especially in this year of economic crisis.
From the perspective of an insurance company, the return on participating in this system is given by cross-seling and by up-selling, because the value of the policy does not cover the services provided by the company.
XPRIMM: How do you see the implementation of the amicable report?
R.M.: There are many voices that advocate for postponing the introduction of this project, for two reasons: fraud and disruption of the activity in the offices of the insurance companies, which will be directly involved in solving the claims cases, after the withdrawal of the police.
I believe that the implementing of the amicable report is necessary, whether it is done on the 1st of June or on the 31st of December; most likely, the situation cannot radically change in six months.
In any case, ASTRA-UNIQA is prepared for this measure. We have done training sessions, we have processed the materials and I believe our people have been ready for this for a year.
XPRIMM: Which would be, in brief, the objectives that the company ASTRA-UNIQA has set for 2009?
R.M.: For this year, ASTRA-UNIQA has set the following objectives: a 19% increase on all lines of business, implementing the above-mentioned projects, occupying the third place on the non-life market and a RON 9 million profit. Also, in 2009, we have decided to double the share held by life insurance in the ASTRA-UNIQA portfolio, up to EUR 4 million.
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War of households: a new hope?
The amicable report is not postponed
ECHR: Insurers have the green light for conducting their own inquiries
MILLIMAN supports FIAR 2009
ASTRA-UNIQA is preparing "an earthquake" on the insurance
Non-life insurance slows down the ALLIANZ-TIRIAC business in Q1
VIG business in Romania stagnates at the Q1/2008 level
Over 60% business growth for BCR Asigurari de Viata in Q1
Unit-linked insurance affects the business of ING Asigurari de
Viata in Q1/2009
GENERALI Asigurari: RON 6 million profit and 17% growth on the
life segment in Q1
RAI Asigurari expects a doubling of on-line sales of travel insurance
EUROINS, once again on the brokers' side
Insuring art objects: on the line between rarity and unknown
EUREKO and CLAL are leaving the MTPL market
KD Life has received the ISC approval for its financial recovery
5.7% growth for the Russian insurers in Q1/2009
VIG results for the taughest quarter on the financial markets
GENERALI Group profit down by 88.6%
Ukrainian life insurance market, down by 23%
Salaries in listed companies up 30% in 2008
The industry consumes 26% less energy
Multinationals control 85 percent of the local beer market
THE EDITORIAL STAFF:
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