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Daniela GHETU, Editorial Director, XPRIMM Publications
Motor insurance in CEE and CIS: trends and challenges
Context
• Despite diversity most motor insurance markets are facing the same trends and challenges
• CEE and CIS markets are very inhomogeneous … but motor insurance plays a dominant role almost everywhere
• Where implemented, MTPL insurance is one of the market’s drivers
CEE motor insurance
Total motor GWP evolution 2009 - 2014 CEE non-life GWP portfolio, 2014
CEE non-life CLAIMS portfolio, 2014
CEE & SEE motor insuranceCEE/SEE’ 14/13 change in motor GWP
MTPL• Positive evolution:
– Tariffs corrections– Slightly increasing cars sales
• Negative evolution:– Highly competitive market
MOD• Positive evolution:
– Tariffs corrections– Slightly increasing cars sales
• Negative evolution:– Highly competitive market– ageing of the national fleets
CIS motor insuranceCIS non-life GWP portfolio, 201414/13 change in GWP - DMTPL
14/13 change in GWP - MOD
14/13 change in GWP – Green Card
CIS motor insuranceCIS non-life GWP portfolio, 2014• the political instability born by
the Crimean conflict had a dramatic impact on the Ukrainian and Russian markets• despite its dramatic downsize (~30%), Russia still accounts for 80% of the CIS market• results denominated in EUR show a worse situation as compared with the local currency (devaluation of the local currencies against EUR, USD)
CIS motor insuranceCIS non-life GWP portfolio, 2014
• Russia – the MTPL crisis: Inadequate tariffs (11 years old); currency devaluation; cumulative significant inflation -> high loss ratio, worsening combined ratio -> insurers gave their retail business in regions with poor results -> unavailable insurance
• Ukraine: falling business because of political turbulence; bank failures led to a significant abatement of the bank lending activity and decreasing MOD business
Common trends: low profitability
• Tariffs– Highly competitive markets – tariffs going down to
an unsustainable level (RU, PL, HR etc.)– Correction measures in some countries (RO, BG,
AL, SB, CZ)– Tariffs’ liberalization • the Croatian “case”: GWP down by 18% after
liberalization; market stability threatened• On going liberalization process in the Adriatic area
Common trends: low profitability
• Claims – the currency challenge– Currency devaluation puts pressure on the claims
expenditure -> worsening technical results– With very few exceptions, the entire CIS area
affected, Turkey and some of the ex-Yug countries– Less influence on the MOD results – in many
countries tariffs are settled in euro, according to the cars’ prices
Common trends: low profitability
• Claims – the bodily insuries’ challenge– Bodily injuries’ claims rose dramatically (ex. Turkey x6 in 5 years)
• Lack of an unitary procedure for the indemnity calculation -> business unpredictability• Late notification of BI claims;
– Hard to estimate Ultimate Loss– Problem for accurate pricing
• Reopened cases after settlement of direct claims• Harmful retroactive court decisions or regulations etc.
– Cost reduction correction measures• Agreement via disclaimer from courts for direct claims (in order to avoid
reopening cases and extra costs)• Settling indemnity payment by reaching claimants before intermediary firms and
lawyers. • Decreasing costs by implementing more proactive methods to shorten the court
case process• Elaborating Permanent Injury Ratio guides etc.
Common trends: low profitability
• Fraud– Some countries reported increasing fraud
attempts– Wiplash claims vs. fraud– Temptation to exagerate losses
Common trends: distribution
• Distribution fees– Distribution fees are subject of debate in different
countries: free market vs. cap on fees perceived for the mandatory lines distribution
• Online distribution– Need of a better control of the online distribution
practice– Under the scope of the future IDD– Consumer protection issues
Common trends: MOD market shrinking
• National fleets are ageing – low sales of new cars + increasing commerce with second hand cars– CEE – slight recovery in car sales +113.000 units in 2014 vs. 2013– Turkey – decrease of sales due to bank lending regulation changed (-
73.000 units in 2014 vs. 2013)– CIS – decreasing sales of new cars (huge fall in Russia and Ukraine) –
400.000 units in 2014 vs. 2013• Number of MOD insurable cars is decreasing
– Ex. Hungary: average age of cars grew from 10.35 years in 2006 to 13.4 years in 2014
– Poland: over 50% of the national passenger cars stock consist in vehicles older than 15 years; only 21% of the national car fleet consist in vehicles “younger” than 10 years
• Softening market – in part under the influence of the MTPL market
Common trends: the technology assault
• Online marketing and distribution• The “big data” technologies – the future of the
motor insurance– Sales improvement by better knowing the client’s needs
and preferences (social media as an information source)– Better knowledge of the consumer’s behaviour in traffic
– increased opportunities for a fair pricing and better bonus-malus policy
– Safer cars by improved cruise control– Still unaffordable for the emerging markets
Conclusions
• Motor insurance will continue to play an important role
• Main cash flow source vs. main challenging line• Very important to create a sound business
environment• Ever changing business – needs accuracy,
flexibility and timely adjustment to the new realities
