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 Interview of the week 

Interview of the week


Antonio SOUVANNASOUCK, Managing Partner, ASIGEST

I think that, for the insurance market, the third quarter of 2009 was the highest point and that starting the fourth quarter we will start seeing business growths again. It is true that in the first quarter the market had a 4% evolution, but this was due to increased premiums on the mandatory MTPL segment and on the Motor Hull segment; therefore, it was an increase in volume of premiums, and not in number of insurance policies or of customers.

XPRIMM: The Romanian insurance market has been affected by the financial crisis for more than half a year. What were the most notable consequences upon the Romanian brokerage market?
Firstly, we refer to an economic crisis, which clearly affects the insurance market, too. Thus, a number of corporate clients have closed and many other companies have limited their activity.

On the other hand, in this economic climate, competition becomes fiercer. It is important to provide added value to services, especially since the premium rates were on an upward trend.

XPRIMM: Which are the lines of business where premium rates are still growing?
This trend can be noticed in all segments, starting with Motor Hull, where, actually, the increase is welcomed, given the registered claims rate. Although it is difficult for the client to understand, this increase is also in his benefit, as some insurers could be in a position of not paying the claims. I appreciate that this price increase will result in a homogenisation of the market and in an aligning to the European level. Meanwhile, one positive aspect is the introduction of the deductible, through which the education of drivers will increase, making them more responsible.

XPRIMM: How was the crisis felt by insurance companies in Romania?
The corporate segment posted a 10-15% turnover decrease both for brokers and insurance companies, firstly because many corporate clients have gone bankrupt, and then because most of the companies left on the market have decreased activity and had to cut costs, which often translates into purchase of cheaper insurance, the waiver of certain coverage or even of some types of insurance. But on the retail segment companies still delivers business growth, which makes the overall insurance market stagnate, or even register a slight increase.

This dynamics is also valid in the particular case of ASIGEST, because we have decreased on corporate, but we managed to maintain with a growth on retail. Even if retention rate fell from 77% to 65%, through marketing, through higher workload, by investing more in resources, we can make new business on retail.

Many individuals give up insurance during this period because of uncertainty about their financial future, which makes them prefer to keep as reserve the money they would pay on insurance premiums. However, we were able to find new clients that we convinced to buy insurance, but they can change their minds anytime and not pay rates.

XPRIMM: In what point of the crisis are we: the beginning, the middle or the final stage? How do you think the insurance market will evolve in this context?
I think that, for the insurance market, the third quarter of 2009 was the highest point and that starting the fourth quarter we will start seeing business growths again. It is true that in the first quarter the market had a 4% evolution, but this was due to increased premiums on the mandatory MTPL segment and on the Motor Hull segment; therefore, it was an increase in volume of premiums, and not in number of insurance policies or of customers.

For insurance brokers, however, the situation was more difficult because, although the volume of mediated premiums increased, the volume of MTPL and even of Motor Hull commissions decreased, which has very much adversely affected us. Renegotiating contracts with insurers, accepting in some cases to lower the commissions for Motor Hull insurance - these are consequences of the fact that we have long-term partnerships and we try to think in terms of win-win-win, to find the best solutions for us, for insurers, but particularly for the insured people.

XPRIMM: What strategies do you use to attract new clients, especially on retail?
Currently, we have new clients, but they are mostly people who have had until now an insurance policy with another broker or insurance company, and they choose to renew it at ASIGEST, due to the competitive advantages we offer: the best offers for insurance and for additional services (management contracts , prompt assistance in case of damage, partnerships with repair shops etc.).

XPRIMM: How did the introduction of the amicable report influence the perception of customers regarding motor insurance and the services offered to them?
From the general information I have, I can notice a state of normality and a natural evolution of things regarding the MTP amicable report. Its introduction is a step forward towards a higher degree of civilization and towards reducing the times for claims solving. Now, not even two months away since the implementation of the amicable report, inspectors of the insurance companies dealing with this are still losing a lot of time, but it is normal for this early period - the evolution in time of the processes should be followed.

We had and we still have clients who want to be advised by our people from the claims department in completing the amicable report form, and we have provided all additional information they needed, but only those insurers have the authority to tell their clients exactly how to proceed.

XPRIMM: Do you consider that, in the current economic context, voluntary household insurance has an increased potential?
A. S.:
Yes, I am sure there will be an increase on this line. Since the business line which bore substantial increases in insurance, the motor segment, no longer produces volumes, on the contray, has the biggest claims rate, it is clear that both insurers and brokers have to switch to retail, to property and health insurance, pensions etc. There is already a very substantial decrease in household insurance costs felt on the market, somewhere to 20-25% of the costs of two years ago - to increase the volume on this segment -, so the premium rate reaches the value 0.12 (for an EUR 100,000 apartment, a premium quotation of 0.12 means EUR 120 per year, or EUR 10 per month). Enforcing the mandatory household insurance law will lead to market growth on this segment, because people will become more and more aware that voluntary insurance is not very expensive, and it provides coverage for many other risks.

Certainly, I think there is still is place for further decrease, because for any insurance portfolio, in order to enter the market you should start with the lowest costs, to sell as much as possible, this being followed by an improvement in the portfolio over time, especially since the claims rate is low in this sector.

A problem is that people do not have the necessary information, not that they have no money to pay. Basically, who owns an EUR 100,000 apartment can also afford an insurance of EUR 120 per year (currently, this is the cost of a weekend at the seaside or in the mountains) - the problem is to realize the need for such insurance, especially in times of crisis, when it is a lot harder to find resources and any damage can unbalance you and may even lead to loss of property. It is important that the public is educated on the matter: what risks can voluntary household insurance cover, what advantages you can have for the amount you should monthly pay for the premium.
From this point of view, the law of mandatory household insurance is important precisely because of its educational value and for the cross-selling opportunities which we estimate it will provide.

XPRIMM: Do you think the number of insurance brokers will decrease?
A. S.:
Certainly. On the one hand, those brokerage companies that were born in recent years, due to momentary opportunities, will most likely be closed.

Moreover, small brokers, who had a relatively stable business, will realize that it does not pay to maintain such a separate activity, and will give their insurance portfolio to other companies.

XPRIMM: Are you or have you been interested in purchasing such portfolios, from the brokers who have decided to leave the business?
A. S.:
No, we were not yet involved, nor are we seeking to purchase portfolios. In the insurance field and at this stage of development of the profile companies, still in the "family" stage, it is quite risky. We try to grow organically, naturally, to find new clients with our own resources. However, we can say that we made such an acquisition when we switched to retail, because we preferred not to start from scratch, but to start from a clients' base - and we did very well. We are further expanding this clients' base; in the first six months we have increased by about 16% on the retail; unfortunately, this is offset by the negative results on the corporate segment, where we are very affected. But, certainly, there are opportunities in times of crisis, you just have to know how to find them and to use your experience, to use your strengths, to keep on being dynamic.

XPRIMM: Thank you! | Published on 17.09.2009

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