Let’s play a business game. Say, you are a life insurer and you want to expand in Central Europe. You have a choice between four countries – the Czech Republic, Hungary, Poland, and Slovakia – and can pick from a whole range of insurance products – from traditional endowment and whole life to last-generation investment policies.
Where exactly would you go and what products sell to achieve the best possible financial result?
As part of our preparation for the 6th Moscow “World Views” international life conference (expect full coverage in this blog), we have analyzed CE life performance in H1 2010*. Here is our strategy based on the data.
Step 1: Choosing the Right Country
Central Europe is back to the league of successful emerging market. The average life premium growth in the region reached 14.2% over H1. We registered improved premium dynamics in all countries of the region, and predict that the full-year figures will exceed the 2008 record level.
But clearly, not all CE insurance industries are created equal – some are equaller. To improve your chances of a good score, go to the Czech Republic. There, life premium growth over the period was 21.5%, and the claims to premiums ratio came to 51.8%.
Hungary, despite its fiscal problems, scored second. The premium growth figure was the same, but the claims ratio reached a whooping 79.3%. Poland, still the largest life market not just in Central, but also in Eastern Europe, grew 8.4%, with an even higher claims ratio – 83.7%. We have placed Slovakia on the bottom of our list, as the country demonstrated only a 5.5% growth on H1 2009. However, we may be a bit unfair to the Slovak market – its claims ratio has not been published yet. So, choose between Poland and Slovakia at your own risk.
Step 2: Picking the Right Products
On average, CE life insurance clients have demonstrated a very high risk appetite – despite the many investment disappointments the crisis has brought about they are ready to buy policies linked to performance of stock markets. Such an approach is typical for Czechs and Hungarians: in the two markets, unit-linked sales drove the total premium growth. In the Czech Republic, new investment-linked products accounted for 57.7% of the total new sales. In Hungary, unit-linked accounted for 66.3% of the total life figure.
In Poland and Slovakia clients were less risky. Poland, after a drop in popularity of polisolokaty (bank deposits “wrapped” as insurance policies for tax reasons), is still looking for a new growth driver. In Slovakia, the unit-linked segment took up just 30.4%, which is comprable to the 30.5% figure of H1 2009, when stock market environment was not positive enough for investors.
In terms of payment frequency, everywhere but in Slovakia, clients gave preference to single-premium policies.
Step 3: Last Touches
In our research we didn’t focus on sales channels. However, some distribution trends are so visible they simply cannot be overlooked.
For a business success in CE insurance markets you would have to have strong links with banks and/or brokers – and be ready to allocate funds for significant acquisition costs. For example, in the Czech Republic, commissions to the brokerage channel grew 22.3% compared to H1 2009 and accounted for 72.3% of the total acquisition expenses figure (almost 68% in January-June 2009). In Poland, average acquisiton costs grew almost 8%, in the A&H segment – as much as 24.4%. Such expenses, however, pay off: Czech-based Komercni Pojistovna, jointly owned by Sogecap and Komercni Banka, leapt to the second place in the local life market after generating a 181.3% premium growth in H1.
So, would you push the same buttons?
*For full results of the survey, see The Insurer 30 (special Baden-Baden edition) or contact us at
khrennikova@in-sure.ru
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