One of the growth drivers for the life insurance segment would be the deductibility which would certainly be a strong motivating factor for potential clients, stimulating the long term savings for individuals. This would also be reflected through an increase of the population’s financial security with long term effects for the personal and public budgets and for the economy. It is important to underline the current context of the financial markets and with regard to this, the competitiveness of the financial planning offer coming from the insurance industry, especially in terms of risk – yields rate. While, for most popular savings – i.e. bank deposits – an annual interest rate of 2% for euro placements would nowadays be a good deal, Allianz-Tiriac, for example, offers a guaranteed interest rate of 4% to its clientsof traditional life insurance.
Sustenability: the safe way to a mature market
We believe there is still enough room for growth on the Romanian insurance market, especially on certain segments like non-motor in general and life and health specifically. These are segments with a high potential, if certain growth drivers will be implemented.
Another growth driver for the local insurance market would be, in our opinion, a coherent health reform with a welldefined basic package and total deductibility for the facultative health insurance for the employer and the employee as well, associated with a free market which respects the principles of free competition. The development of the facultative health insurance would reduce the pressure on the public budget.
A price increase trend can be noticed on the non-life segment, especially on MTPL, which is a sign that things are going in the right direction. For 7 years now, the market posted an aggregated loss, determined mainly by the motor segment and especially by non-sustainable prices for MTPL policies. Therefore, the price increase on this segment can be considered a positive sign, as to reach a healthy balance on the market. We have to speed up this process and have a pricing policy strictly based on actuarial principles.
On the property & casualty non-motor segment, the context of the house holdinsurance will probably bring the market to a degree of coverage of over 50%. What isimportant on the household insurance segment is the clients’ awareness regarding the need for insurance, especially if we are taking into consideration the latest floods.
The insurance coverage is still low, especially in certain geographical areas, such as rural areas, and we have to understand that these are the most exposed ones.
In respect of underwriting volume there will probably not be any significant variations this year or in the following year.
The preliminary information shows a certain stability of the market. Looking at the numbers for the first semester, we can notice an increase of 1% for the life segment and an increase of approximately 6% for the non-life segment. It is obvious that the market still depends on the motor segment and this dependence will certainly limit the market dynamic due to the fact that the fleet is getting old in Romania and the new car sales are decreasing, which also influences the insurance market. Romania is among the markets with the most abrupt new car sales decrease in the past 5 years, of approximately 77%. Moreover, half of the fleet is older than 10 years which means these cars cannot be insured with an MOD policy (Casco), therefore the effect might be compensated on the short term only by pricing policies. But we should not yet expect to see a two digits market growth.
The maturity of the market is reflected mainly by the financial stability of itsplayers, by the legal stability and frameworkpredictability and by clear measures andlong term view. Also the client awareness regarding the importance of the insurance products might be an indicator for a mature market. Financial stability means that at any given time, the players will be able to meet their financial obligations to the customers. Financial stability was always a priority for Allianz-Tiriac and we have always strived to maintain our financial safety indicators above the minimum standards stipulated by the supervisory authorities. Also the long term view, which is closely linked to the stability and the predictability of the legal and financial framework is essential for the development of the market as a mature one.
In respect to the clients’ awareness regarding the need for insurance, approaching the clients is still a challenge within the Romanian market for insurance companies, due to the economic context on the one hand and the population income level as compared to other countries on the other hand. Speaking of the clients, we have to say that in terms of a mature market it is also important to focus on the clients’ responsibility, which can be reflected by deductibles. Deductibles bring certain advantages for both parties - the client and the insurer – such as would reflect in lower prices for the client, lower claims frequency and it might influence even the MOD penetration degree. From the product range perspective, we believe there is a generous offer on the market, covering all the clients segments - from corporate to individual clients and from life insurance policies with investment component or MOD products to green energy insurance. For example, Allianz-Tiriac offers green energy insurance, using the extensive knowledge of the Allianz Climate Solutions, the specialized division of Allianz Group.
To conclude, we can say that we expect mainly the following, for a transition to a mature market: financial and legal stability,
predictability, and a long term view. Only this way the market will be able to have a healthy development on the long term.