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 Interview of the week 

Interview of the week


Florina VIZINTEANU, President of the Board, BCR Asigurari de Viata VIG

It is necessary to go a little deeper with the analysis. In the broader category of life insurance we have a segment that has generated growth and which marked a significant evolution, both last year and this year - investment-type insurance: unit-linked insurance, index-linked insurance.

XPRIMM: The whole insurance market has experienced negative dynamics in the first six months of this year, life insurance being the only segment that has seen an increase. How do you comment this reality?
It is necessary to go a little deeper with the analysis. In the broader category of life insurance we have a segment that has generated growth and which marked a significant evolution, both last year and this year - investment-type insurance: unit-linked insurance, index-linked insurance.
It is very natural because, since the end of 2008, the range of investment possibilities has greatly restricted. The real estate market is still in a state more or less uncertain, so a real estate investment is not very attractive right now, unless there are some special opportunities. In no case do we have the situation from 2005, 2006 or 2007 when there was a great effervescence on the real estate market. Regarding the stock exchange, we are still in the situation in which the Bucharest Stock Exchange is not the most dynamic investment environment.
In this context, great accent was placed on financial and banking products. We, as life insurance companies, come with packages that come in addition to what a bank traditionally offers: the bank comes with a range of savings and investment type products, and life insurance comes to complete these packages.

XPRIMM: What is the profile of the Romanian client interested by index-linked products?
We can say that those who came to this area were those who had financial resources. Basically, the life insurance market has developed on the medium-plus segment. If we talk in terms of bancassurance - mass-affluent and above, not mass-market.
Three years ago, we were talking about a development on the mass-market, because we were talking about products that were related to a credit. But now, we return to a market of those who clearly have above average income and who can afford to save money. Moreover, we must keep in mind that this increase is not spectacular. We are talking about an industry where life insurance penetration is very low. And it was low, even in "boosting" years - then we were witnessing very high growths because we were starting from very small volumes.
Indeed, every year there have been very large increases that were somehow related to the economic growth, but even in peak years the penetration rate was very low. Density and penetration rate were very low, even when Romania was on an economic growth trend - this is because when we were on a trend of economic growth, but also of consumerism, and automatically, life insurance was not even then a priority, but consumption was. Currently, we are on a negative trend in terms of economic growth, so automatically, life insurance is not a priority now, either, for the simple reason that people no longer have the available financial resources.
Also, we must keep in mind that there is the effect of the 24% VAT, which automatically comes with an impact, because from the moment people pay extra for all goods, this automatically reduces the financial resources that could be spent on life insurance.

XPRIMM: In terms of life insurance share in the total market, we had an almost constant 20% in the last eight years. At this point, life insurance increases, while the rest, the other classes, are experiencing a decline. How do you think the share of life insurance in the total market will evolve in the future?
Its share will increase. In fact, it has already risen, for we had at one time even 26%, we also had 17%, but I do not think we will go over the psychological threshold of 30%.
We see the development of the country "through the lenses" of the economic growth, following several macro indicators. But when we analyze the insurance industry, there are some indicators that position you closer or farther away from certain areas of Europe. And I am not talking about Western Europe, I am talking about the Central and Eastern Europe area, where we are basically in, and anyway we are below that level, both in terms of ratio general insurance versus life insurance, as well as regarding penetration rate, density and average premium.

XPRIMM: In this context, how do you see the evolution of life insurance sales? But that of sales through the bank? Are we heading to one stop shopping, to the financial adviser who can provide a wide range of services, from banking to mutual funds, or do we expect a separation and a specialization of distribution channels?
Initially, we had specialized channels. We were going straight on the direct sales force channel on life insurance, and then the banking channels began to develop. In parallel, those networks that sold financial products, loans etc. have appeared. Somehow, I believe that a selective development is not the best solution right now, and I am not talking strictly from the point of view of the CEO of a life insurance company, but from the point of view of the individual, the counselor who sells life insurance. Because he already becomes a person who has experience in the area, who has developed, and who needs much more.

XPRIMM: Given the context of this crisis, how will insurance continue to sell?
It is obvious that the life insurance advisor is a character who becomes increasingly better educated and increasingly more complex. When he can offer life insurance in a professional manner, he has already entered the area of financial counseling, as life insurance itself has crossed the border.
Basically, we talk about a border industry between insurance and the financial area. For example, we do not simply sell life insurance covering the risk of death, everyone in the market offers, in fact, life insurance covering the risk of death, but it comes in addition with financial protection, it is savings insurance. In fact, this is how the market has developed from the beginning.

XPRIMM: There are big companies that will come or have already entered the market and have quite sophisticated products. Do you think the market is ready for such complex products?
If we talk in terms of sales force, the answer is: the market is definitely ready. As long as we have successfully managed to sell an index-linked type product, which is very complex, the market is certainly ready. But the customer is not very well informed. He is still not educated enough for these products, and it will take years to educate the client.
But the highly sophisticated products are already here. And if the companies address those segments to which these products are dedicated to, naturally, they will succeed. Any company that comes with a sophisticated product knows that the product addresses a specific market segment. Again, we are not talking about mass-market, because you can not discuss about something like that in life insurance and especially in a country like Romania, with its insurance penetration rate.

XPRIMM: What do you think is the most pressing problem facing the Romanian life insurance market?
The major problem at this point is related to the Romanian economy - it is the problem that affects us all and it will continue to affect us. Yes, we have an increase in the present, but I am speaking of substantial growths - they will come back a bit later after the economy recovers, this is obvious.
Moreover, the impact of the difficult situation from the public sector over life insurance industry is a major one. I am talking about the general decrease of the salaries, about reduced employment. Life insurance companies and banks had a very good customer base, very serious and healthy, in this area. There were people who had above the average income, with a quite high level of education. The impact of the measures adopted in the public sector will have on the life insurance industry can not be measured yet, but there is a risk, from my point of view.

XPRIMM: Returning to life insurance area, there are at least two major players entering the market this year. How will the entry on the market of two important names, that have been very much expected, change the landscape of Romanian insurance market? Do you estimate that this will determine overall changes?
Not in the near future. Companies that are currently on the market have years of development behind them. It takes time to set up the basis and to get the whole operational process of a life insurance company to work. So then, in the next period of time, I do not see dramatic changes in terms of life insurance market structure.
What I do see and I wish to emphasize, however, is the positive side: any new player entering the industry gives us a positive signal. It is a market where there is enough place - returning to what I said earlier, we have a very low penetration rate, so there is and there will be enough place for development. And any new entry in the market, especially if it comes with know-how and it is a company that has experience, can only bring value to the market. From my point of view, it is an encouraging thing.

XPRIMM: What are the objectives for the coming years?
At BCR Asigurari de Viata level, basically, this year we've covered all lines of products that could have been launched through the banking network.
A month ago, we launched a scholarship annuity product. The campaign slogan was "Your dreams will come true" - both the dreams of the child and of the parent. We considered it was a time when the need for such a product was obvious in Romania, given both the negative issues the educational system in Romania is facing and the parents' lack of material resources for their children's education.
As you have seen, there is a tendency to go to university studies abroad, a trend that can be very beneficial for our society, and such a product can support at any time such objectives of a child from a family with an average income. Moreover, we believe our client is a client dedicated to his child. This is the Romanian family structure, as the parent generally wants what is best for his child - and we come with this product exactly in this direction.
This is the product we have launched, in addition to investment type products that have high demand. It is a product very "dear" to us and we believe that, through it, we will manage to reach important objectives.

XPRIMM: Thank you!

Editor: Alexandru CIUNCAN | Published on 02.12.2010

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