|
Alexandru CIUNCAN
Column Coordinating Editor |
Mihaela
CIRCU
Senior Editor |
> The PRIMM - Insurance&Pensions Magazine dedicates its first issue of 2007 to the Romanian accession in the European Union and the impact of this event on the insurance industryin Romania.
The subject is not a new one and the approach will not guard us from the, we hope, readers’ constructive criticism. What really matters is the development perspective of the brokers and insurers with the EU integration, analyzed through the industry’s top-managers’ perspective. |
A Rising Star
on the EUropean Market
Integration = Competition
The study made by the PRIMM-Insurance&Pensions Magazine team gathers the opinions of the insurance and insurance broker’s
top-managers that have analyzed the integration challenges and opportunities of the insurance industry.
We shall start from the premise that, at the time we have edited
this material, 48 insurance companies and 30 insurance brokerage companies have notified the Insurance Supervisory Commission (ISC) regarding their intention of activating on the Romanian market. It is possible that the numbers will double by the time you have read
these lines.
We would like to highlight that all of these are taking place on a market where 62% of the capital is foreign and the local players are a rare sight, at least in the Top 10. The question is if the major foreign groups were already here - what is the interest of the newcomers?
A part of them were already operating through some insurance companies that were fronting, declared Antonio SOUVANNASOUCK, Managing Partner of ASIGEST insurance broker. He thinks that
a part of them, but not all, will come with products and services
that don’t currently exist in Romania, which will undoubtedly lead
to a more fierce competition on the market.
The same conclusion was reached by the insurers which feel that the integration process will trigger a competition boost, which will be better handled by the international companies, considering their extended investment capabilities, as Mihai TECAU, President of BCR Asigurari, stated.
In order to support the statements above we will bring to your attention a poll from 1asig.ro, the most popular insurance portal in Romania: 88.4% of the visitors that participated considered that the incoming wave of European insurers will affect the market in terms of competition.
Competition is not seen from the same perspective of all specialists, the President of the National Association of Insurance and Reinsurance Companies from Romania (UNSAR), Cristian CONSTANTINESCU, which stated in numerous occasions that the insurance market will be influenced by a low competition level compared to the other fields of the economy.
Cristian CONSTANTINESCU, who is also the General Manager of ALLIANZ - TIRIAC Asigurari, supports his statement with the argument that the local market is dominated by the auto segment, which requires a local presence and territorial representations.
Nihl sine lex
The preparation for the EU accession generated a series of legislative changes in order to harmonize the national legislation with the acquis communitaire. But the consequences for the market will be quantifiable by the end of 2007, as according to the OMNIASIG President, Constantin TOMA, the specific opportunities generated by the legislative changes - introduction of the new compulsory insurance product related to professional risks and the increase in the minimum coverage limit for some professional liability insurances will affect the future of the industry.
The company he is running is part of the VIENNA Insurance Group, just like UNITA, AGRAS and OMNIASIG Life.
The main opportunities generated by the legislative changes regard the enlarging compulsory insurances, imposed by the European Union, stated Ioan VREME, Deputy General Manager at BT Asigurari.
The EU integration also represents a guarantee for multinational investors and clients in what regards respecting the European
principles. Romania is now part of a market with larger horizons,
offering more opportunities, governed by the laws of free competition which are regulated by European principles.
All of the above can only lead to growth, stability and professionalism, all translated in increased benefits, which are relevant to customers, claims Theodor ALEXANDRESCU, General Manager AIG Life, a life insurance company that relies on the private pension’s system development.
European brokers
It is obvious that the insurance industry has gone through a series
of transformations in order to be prepared for the European
community, which is why the major changes only start happening
now. The increasing competition in the industry will lead to better
insurance brokerage services as well. And it is now clear that
the companies that will not align themselves to this trend will disappear.
One of the many winners from the tens of companies that have notified the ISC in order to offer their services in Romania are the insurance brokers because many European insurers will use their services, thus avoiding the big costs involved in having a big territorial network.
The broker will also gain because of the integration as there will be all more opportunities in the general economic field. Cristian FUGACIU, General Manager of MARSH Romania, highlights: Risk consultancy will play an important role; estimations are already showing an increase of this field. That is why Marsh has created a study regarding the risks involved by the accession that will affect companies in general.
The growing importance of insurance brokers will be joined by
the growth of the service quality. Thus the brokers will evolve
from a distribution channel and intermediary between insurer and
client level to a consultant level that will offer complex risk
management services for the clients. I estimate an important growth of the insurance broker’s role, as well as of their professionalism and quality of services [...] as the development potential is quite high, stated Dumitru CERACEANU, President of ASIBAN.
The brokerage market can brag with the fact that the international
players were on the local market since the very beginning, still there are a lot of brokers that haven’t notified the ISC, but want to enter the market, and will inform the supervisory authority of their intention to offer their services on the Romanian market. We feel that the companies that wanted to operate on our market are already here, stated Bogdan ANDRIESCU, President of UNSICAR (The National Union of Insurance Brokerage and Consultancy Societies from Romania), which has also highlighted the fact that the professional union he is leading and as a BIPAR (Bureau International des Producteurs d’Assurances et de Reassurances) member is open to any insurance brokerage company that wants to operate on the Romanian market.
The EU accesion implications
I would not dare to think about the integration procession, I would
rather stick to accession for the time being, mentioned one of
the managers we have been speaking with.
The difference is given by, as Dumitru CERACEANU mentioned,
the fact that: There is a discrepancy between the European theory
and the Romanian reality in insurances as there is a difference
between the European claims ratio and Romanian premium price
level, between the western know-how and the Romanian negligence.
We expect the market to become a lot more technical, said
Tudor MOLDOVAN when referring to the impact bureaucracy and
the new regulations will have on the daily activities. More than that, the reports that will have to be presented to the public will complicate our activity in 2007, stated the GENERALI General Manager.
Actually, the process of aligning to the specific regulations
of the insurance industry (just like the financial informative
reports, the solvency calculus and the specific requirements
for some types of insurances) may generate problems adapting
to the post-accession requirements for some of the market operators, mentioned Constantin TOMA.
As for many other industries, one of the accession’s implications will be the growth of premiums, to the “joy” of the end-customers. And according to the specialists that answered the questions from media, the insurances are no exception in this matter. The prices on the European insurance market are a lot bigger than the Romanian average. For example Auto Hull insurance should be three times more expensive if we consider the fact that the claims ratio is 60%, compared with the less than 25% in Western Europe, warns Cristian CONSTANTINESCU.
Also, Romanians pay less for property insurance, considering
that our country is one of the most prone to natural disasters.
An earthquake might severely disturb the household insurance
prices, Mihai TECAU feels.
On the other hand, in what concerns life insurances, tariffs might
go down, Bogdan ANDRIESCU said, and his arguments are related
to the growth in portfolio of the main insurance companies.
Conclusions? There are none!
For the time being, we must say that no one can estimate precisely the number of insurers that will enter our market, nor their business, thus neither the consequences that existing companies will have to overcome.
One thing is clear, a 22 million people market with a significant
growth potential should not be missing from any insurers’ map.
Also it is certain that the quality of the services provided,
the price - service quality ratio, promptness in paying the claims,
the customer service can save the few companies with Romanian
capital. And last but not least, innovation... |
