Angela TONCESCU, President, Insurance Supervisory Commission
The evolution registered by gross written premiums by the entire insurance market in 2009 met ISC expectations. General insurance increased slightly, despite the difficult economic context. I would characterise it as a success given the declines registered by car sales, the leasing and real estate markets, and enterprises in other economic sectors.
XPRIMM: How would you draw up a balance sheet of the Romanian insurance
industry in 2009?
Angela TONCESCU: The evolution registered by gross written premiums
by the entire insurance market in 2009 met ISC expectations. General
insurance increased slightly, despite the difficult economic context.
I would characterise it as a success given the declines registered by
car sales, the leasing and real estate markets, and enterprises in other
The Life insurance segment felt the financial crisis most acutely, given
rising unemployment and the lower income of consumers of insurance products.
One of the elements that had a major influence on this sector was the
psychological factor, because fear and uncertainty regarding the financial
security of consumers led, in the first part of 2009, to both an increase
in of the number of contract surrenders and the postponement of an intention
to buy an insurance policy.
The first signs of a revival of the Life insurance segment were felt
in the last quarter of last year when the premature termination of contracts
XPRIMM: Can we talk about a maturing of the market given the difficult
economic conditions it has had to face lately?
A.T.: To talk about a maturing of the Romanian insurance market we
should have to notice a maturing of the financial behaviour of the population.
The evolution of the insurance market in 2009 demonstrated that long-term
savings products, such as Life insurance, lost ground to short-term bank
deposits. There was a change in the financial behaviour of Romanians
that was insufficiently sophisticated even before the crisis began. Similarly,
if we look at the structure of written premiums, we see that Motor lines
- Motor Hull and MTPL - still account for the major share of total gross
written premiums. We cannot yet talk about a maturing of the segments
that should really matter - Life insurance, Health insurance and Household
However, if we consider the economic context, then we should mention
that this industry has made strenuous efforts, both at the Commission
and company level, to identify and apply best practice to counteract
the effects of the crisis. Certainly, we all had to respond almost spontaneously,
but very cautiously, to the challenges of this period, so that at the
level of insurance product consumers the affects will weaken. Somehow,
the financial crisis has encouraged a more responsible behaviour by companies,
and here I refer not only to the insurance industry. And that is because
the economic environment was the same for all industries.
When we compare insurance with other financial markets, for example leasing
which lost over 75% of its business volume in 2009, we can say that the
insurance industry had a satisfactory development last year.
Yes, the insurance industry's efforts should focus further on increasing
an awareness about the concept of insurance. I would say that insufficient
knowledge of this market among its potential customers is the main obstacle
to the development of the insurance industry.
Regarding the management of insurance companies, I think they understand
that the market has reached a maturity and that they should not run after
market share anymore, but should manage their portfolio in a more profitable
XPRIMM: How did the Insurance Supervisory Commission get involved
during this period in managing the financial crisis? Did it start initiatives,
did it offer advice to insurance companies to deal with the problems?
A.T.: It was a year in which the Commission got more involved in
all the problems of insurance companies. Throughout 2009 we tried to
meet with the management of the companies more often to discuss all their
problems, to see how they could be solved for the market to develop normally
and smoothly. All the steps that the Supervisory Commission took last
year (including reducing taxes paid by insurance companies and brokers)
were for their support, and for the support of the insurance market and
the consumer. I believe this support from the Supervisory Commission
contributed to the fact that insurance companies came through the crisis
more easily than others.
XPRIMM: Which new trends will put their mark on the development of
the insurance market this year, after a crisis year dominated by restructuring
and rethinking of strategies?
A.T.: I think this year will be a year of rethinking strategies.
The financial crisis is still having an affect. For most of the insurance
companies, policies that focused on increasing market shares are already
in the past.
Money has not yet become as cheap as it was two years ago, so shareholders
are not willing to bear financial losses only for the sake of increasing
Remember that the shareholders of insurance companies in Romania are
financial groups of importance on the European market that were subjected
to difficult tests in their own countries. Today, these shareholders
seek profit and this cannot be achieved without seriously rethinking
their business strategies in Romania.
My recommendation to the companies is to carefully manage their portfolios,
to evaluate the risks of each type of insurance, to better foresee their
administration and acquisition costs and, of course, to try as much as
possible to reduce Motor insurance in their portfolio.
XPRIMM: What would be the greatest achievement of the Commission in
this period and how do you intend to contribute, further on, to the so
necessary maturing of the insurance market?
A.T.: The stability of the market in the current economic context
represents, I believe, an important achievement. The Commission has taken
numerous steps to this end. To support the activity of insurance companies
last year, ISC decreased the quantum of operating tax paid by brokers
and insurers, and the MTPL insurers' contribution. The measure was taken
to support insurers' efforts to reduce costs at a time of economic and
financial crisis, but primarily to ensure the stability of the local
insurance market. I think that for insurance products consumers, the
stability of this market during the financial crisis represents a fundamental
factor that will lead to increased confidence in insurance.
Regarding the Motor insurance regulation, I would like to summarise some
of the measures adopted by the Commission during last year. So, starting
on 1 January 2009, according to a rule issued by the Insurance Supervisory
Commission with effect from that date, any Motor Hull insured has the
right to obtain directly from the insurer the document for taking his
own vehicle to be repaired if it was the only damaged vehicle, without
a police presence being necessary anymore.
For MTPL policyholders, from 1 July 2009, an amicable constat report
form was introduced to allow drivers to reach an amicable settlement
of an event in which they were involved if it resulted only in material
damage. In addition, the amicable constat procedure simplifies the recovery
of damages. Also on the MTPL segment, a bonus-malus system entered into
force that aims to encourage prudent behaviour by drivers on the road
by reducing the insurance premium or penalising drivers depending on
the number of accidents they are responsible for, and making the electronic
issuance of the MTPL policy mandatory. I would not like to rank the Commission's
achievements. All measures taken by the ISC are aimed to protect the
interests of policyholders and to increase market stability. Therefore,
I believe that all our decisions are important.
XPRIMM: What do you think can be done to increase customer trust and
the demand for insurance solutions? Do you believe that insurers have
the necessary means and that they should be the ones who act in this
A.T.: I think so. Moreover, last year the Insurance Supervisory Commission
set as an objective an increase in seminars and training to inform the
population and the insured about the necessity and the importance of
insurance. Surely, in 2010 one would expect people to be better informed
about what insurance is and why it is necessary. So all these seminars
and training sessions are welcome, and I think insurance companies should
get a lot more involved in this aspect by preparing and sending correct
information to the insured in order to encourage their feedback.
For example, Romanians should understand that MTPL is an industry that
operates within the same parameters throughout the world. Motor third-party
liability is a mandatory insurance to protect third parties that has
existed for many years and it was not invented in Romania. We, who are
active in the field, understand it better. I think we had quite a lot
of presentations so that the public understood this and so that it understands,
first of all, what motor liability does and why it is mandatory. Any
one of us, being a driver, can cause an accident and if we have such
an insurance, we don't have to use our own earnings. And population needs
to have a better understanding of Life insurance too because these products
have a lot of benefits for those that buy them; they are long term and
obviously the protection is active throughout all the time period. Slowly,
people are beginning to improve their perception and certainly at the
end of the year we will see more Life insurance contracts in the companies'
XPRIMM: There are currently several initiatives to amend the MTPL
legislation in Parliament. Are such changes really necessary?
A.T.: No. MTPL legislation, in fact all insurance legislation, is
transposed from EU directives through rules issued by the Insurance Supervisory
Commission. Lately, we've consulted with both insurance companies that
are authorised for Motor third-party liability and with insurance brokers,
and in the coming period we will complete the final adjustments of the
regulation for Motor liability that will only be to the benefit of and
for the protection of the insured. But there are no fundamental changes
to the regulation because its basis is well regulated and does not require
any further changes. We will only improve some details of practice, where
it was noted that perhaps not everything was perfectly written in the
regulation - and here I refer in particular to claims resolution. I believe
that the rule was clear, but if the market operators feel the need for
further clarification we will do that - for the benefit of policyholders,
XPRIMM: Last year the ISC regulated the process of professional qualification
and the continuous training of insurance brokers who are required to
obtain a certificate of professional attestation. How do you think these
new laws will regula- te the problem of insurance sales in Romania and
how do you see the reaction of brokers to this issue?
A.T.: As any educational system regulates a field as specialised
as the insurance market. A well-trained sales force that can respond
to consumer demand at a high professional level is the objective underlying
the ISC decision to regulate the professional qualification process.
Insurance contracts are, in fact, complex financial products that require
a trained sales force, be it agents or brokers.
XPRIMM: What do you think insurers can do to encourage a more rapid
development of a risk management culture in their companies?
A.T.: The insurance industry is based on risk management. Therefore,
I find it hard to believe that insurance companies operate without optimal
risk management. Surely, this activity can be continuously improved,
especially as the types of risk have diversified in recent years. However,
this is linked to the policies and strategy of every company. It is clear
that those companies that have a strong culture of risk management are
those that have an advantage over their competitors.
XPRIMM: How did the Romanians' behaviour change in 2009, in the sense
of interest manifested for protection and savings products and how do
you estimate it will change this year?
A.T.: As I said, lower population income, dramatically increased
unemployment, as well as fears about job stability are the factors that
made their mark on the life insurance segment in the first half of last
year. I would not yet estimate the evolution of this sector in 2010.
It is still too early for such predictions. Let us not forget that insurance
market development is determined by the evolution of other markets, but
especially by the economic conditions that favour the resumption of population
XPRIMM: What are the main reasons why society in general is reticent
when it hears of insurers and insurance and how should companies counteract
A.T.: I think the main reason is insufficient knowledge of insurance
products and of the benefits they provide. In Romania a culture of risk
management does not yet exist as it exists in mature markets.
But it is built, as is anything durable, over time. We cannot make things
move overnight because this industry is based on trust. All our efforts
go in one direction, that of gaining consumer confidence that we are
a strong, stable industry that provides protection and guarantees that
it will pay for the effects of the insured risks.
XPRIMM: Although the Romanian insurance market is far from having
no other major problems, the deadline for implementation of Solvency
II is rapidly approaching. In light of the impact studies already conducted
in our country, do you consider the insurance market is ready or it can
be prepared in time for its implementation?
A.T.: For Romania as for other countries, Solvency II will require
changes to current business models - both in terms of insurance lines
and of investments.
The Solvency II project is a set of directives that fundamentally alter
many aspects of European insurance legislation. The basic structure of
Solvency II will be similar to that in the banking sector, with three
pillars: quantitative requirements, supervisory activities, and reporting
and transparency. The objective of Solvency II is to increase the protection
of insured persons and of the beneficiaries of policies, to deepen the
integration of the European insurance market and to increase the competitiveness
of insurers and reinsurers.
It is too early to comment on the impact that the Solvency II regime
will have on insurers. However, since the purpose of this regime is to
establish a more efficient allocation of capital within the insurance
industry we can assume that better-managed companies will have an advantage
over their competitors.
XPRIMM: What message do you have for the Romanian insurance market?
A.T.: To work with professionalism as it has worked before, and to
forget about market share. Market share is not obtained by running after
it but through the quality of services each company offers.
XPRIMM: Thank you!
Editor: Alexandru CIUNCAN
| Published on 03.06.2010