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Interview of the week


Radu MANOLIU, Deputy General Manager, CREDIT Europe Asigurari

The last two years have been challenging for the actors in the insurance market. How did CREDIT EUROPE Asigurari, one of the most dynamic and active companies in the field, overcome this period, we invite you to discover in an interview with...

XPRIMM: The economic landscape of the past two years brought a series of challenges for the insurance market. What were the main measures through which CREDIT EUROPE contributed to maintaining stability?
Radu MANOLIU: All persons involved, directly or indirectly, in recent years, in the underwriting activity had to face the increasing pressures of the market, given the continuous and generalized decrease of premiums. As expected, most of the prudential policies were abandoned, from the beginning, gradually or in the end, in the face of these pressures, and this led to the establishment of a dumping system, extended at least to the types of insurance with significant market share. Fortunately, there were enough exceptions from this "fight for survival", where the adjustment process of the rates did not stop at the prudential threshold, both for large size insurers, and for medium or small size ones, so that the market would not yet destabilize; CREDIT EUROPE was one of those exceptions, keeping its profitable underwriting principles, with the assumed risk to register a drop in what market share is concerned, but with the conviction that selection of clients based on clearly defined technical criteria and auto-selection of customers due to them going to insurers willing to increase/maintain market share at all costs can only generate positive financial effects - especially after the domestic insurance market going out of the crisis.
Maintaing the desirable part of the portfolio of clients, our current priority in terms of underwriting, determined, primarily, the continuous decrease of the claims frequency for Motor Hull insurance - from 56%, for policies issued in 2008, to 47% for policies issued in 2010. On the other hand, more effective partnerships with the major repair units that we collaborate with has determined the continuous decrease of the average claim corresponding to Motor Hull insurance - from EUR 1,112 for policies issued in 2008, to EUR 898 for policies issued in 2010. Positive evolution of these two indicators allowed us to maintain high quality of services of claims handling and solving, that our customers are used to, without negatively influencing the financial results of the company. As an implicit consequence, we can consider that we have contributed, to a certain extenet, to maintaing good collaboration relationships between insurers and repair shops - which can only have beneficial effects in terms of customer perception regarding market stability.
We can consider that we have contributed to maintaining the overall stability even by the simple fact that we were able to efficiently manage the financial resources that we have obtained and we were able to save by reducing some costs, such as those related to reinsurance (as a consequence of improving technical results, in the sense of the above-mentioned ideas). Last but not least, we believe that we have contributed to creating an image of stability of the market, including through the active involvement in the PAID project.

XPRIMM: How was the first quarter of 2011 for the company? How did the underwritings evolve and what were the main positive evolutions? Based on these results, what do you expect from 2011?
R. M.: It is known that insurance market development is delayed by at least several months compared to the rest of the economy, therefore the overall decrease of the underwritings in the first quarter of 2011 should not surprise anyone; CREDIT EUROPE did not make an exception from the expected negative evolution of the market, registering the first significant decrease in the company's history, in terms of gross written premiums volume - due to the considerable decrease of the leasing portfolio, the banking one and the one generated by direct sales. If we refer, however, to the number of issued policies, we note not only the lack of a similar effect, but even a significant increase, of 45%, compared to the similar period of last year. Moreover, the perspective changes radically if we refer to the number of policies issued by independent brokers - up by 126% compared to the same period last year. Aforementioned increases are due, however, mainly to the additional portfolio generated by the issuance of PAD policies, and their large number could not compensate, in terms of value, the volume declines registered on other lines of business.
Regarding the expectations for 2011, the fact that we recorded a substantial increase of the portfolio of clients, be they simple PAD buyers, during the first quarter, in terms of profitability, entitles us to hope that at the end of the year we will register a level of gross written premiums close to that of 2010. Basically, we hope to assist to lowering the intensity that characterizes the current fierce battle for customers, so that the premium rates to be established again, at market level, mainly based on technical prudential criteria, and customers and potential customers to reconsider both their insurance needs and the degree of costs acceptance.

XPRIMM: What do you estimate the 2011 trends will be on the motor class - especially on the Motor Hull insurance segment? Do you intend to launch new products that would contribute to a revival of the underwritings on this segment?
R. M.: Besides the prolonging of the current tensions, generated by the mentioned "struggle for survival", I think we will see more and more numerous launches of niche products - both in terms of aimed categories of clients and in terms of services offered. We will remain faithful to our policy of profitable underwriting, but we will try to approach things from a new simplified perspective, according to the current situation of the market; more precisely, we intend to launch an innovative product for the domestic Motor Hull market, through which to offer in advance, as a special discount at underwriting, the bonus correspondent to the alleged year of insurance without claims - the benefits remaining unaltered in the absence of claims without possibility of administrative clearing to another insurer.

XPRIMM: Referring to household insurance, it is seen as the opportunity of 2011. However, the degree of insurance coverage is still very low, which means that the voluntary policies did not receive the expected impetus, either. What evolution do you think this segment will have and what is the company's strategy in this regard?
R. M.: Given the current stage of the PAID project and the fact that mandatory insurance is no longer perceived as last year, I do not think that household insurance will be perceived as the opportunity of the year 2011. A significant increase in volume will be recorded, most probably, not until late 2011, the growth rate depending, however, by the measure and the way in which the fines correspondent to houseowners that did not insure their households will be applied and mediatized.
Like all the other insurers involved in the PAID project, we are also especially interested in cases of potential customers who perceive correctly the necessity of insurance and are willing to also consider a voluntary option; experience has shown us, however, that in the context of the above-mentioned dumping system, more and more customers have demands increasingly harder and harder to satisfy regarding the cost considered reasonable for a complex household insurance policy. We have not yet determined a way to counteract this trend; it is certain, however, that we will get involved again, in the second half of the year, in the new attempt to normalize the status quo corresponding to household insurance.

XPRIMM: One of the main ways to maintain the volume of underwritings is to strengthen the relationship with brokers. How do you view the relationship with insurance brokers and what is its role?
R. M.: Collaboration with independent brokers still represents our strategic priority in what distribution networks are concerned; however, I like to think that most of the partnerships that have emerged in the last 2-3 years transcend the usual scope of the insurer-broker relationship, both in terms of strictly professional side, and interpersonal one.
If the degree of cohesion is the one assumed above, this is due primarily to the fact that we have always been open in relationship with our partners in the brokerage market - the transparency that characterized us being essential for correct transmission of information to the clients they represented. In the core of our philosophy of collaboration with brokers have always been, in other words, their representatives - in relationship with whom we have always placed ourselves at the same level, as we have understood that was the only way in which we could have total trust in each other.

Editor: Oana RADU | Published on 07.07.2011

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