We invite you to the VII Congress of the Polish Insurance Association “Europe – innovations, inspirations, regulations”, that will take place on May 8-9, 2019 in Sheraton Sopot hotel. Registration panel is available at http://kongres-piu.pl/en
Adam Malinowski, member of the Management Board of Generali was appointed chairman of the Property Insurance Subcommittee of the Polish Insurance Association. Among other issues, the new chairman starts work for the Subcommittee on the implementation of the new act on insurance distribution. Adam Malinowski said
I consider as a huge responsibility the confidence placed in me by the Polish Insurance Association by entrusting me with the chairmanship of the Subcommittee. The sale of insurance is a complex discipline, which combines product, billing, legislative, procedural and IT elements. I am glad that key individuals in the Polish insurance market have agreed to become members of the Subcommittee. As a result, we will surely be able to develop solutions to major challenges in insurance distribution, such as the implementation of statutory requirements and preparation of good practices in this regard. I believe that this cooperation will also become a perfect platform for exchanging best experiences and that the committee’s work will also contribute to bringing insurance closer to Polish people and increasing their insurance awareness.
The Subcommittee includes Łukasz Heinowski, Head of the Multi-agency Sales Office of PZU, Grzegorz Kulik, Vice-President of the Management Board of Allianz, Adam Łoziak, Vice-President of the Management Board of UNIQA, Małgorzata Makulska, Vice-President of the Management Board of ERGO Hestia, Artur Maliszewski, President of the Management Board of Axa, Jarosław Piątkowski, Vice-President of the Management Board of Warta, Jarosław Szwajgier, Vice-President of the Management Board of Compensa and Agnieszka Wrońska, President of the Management Board of LINK4. Barbara Sanek, legal counsel at the Polish Insurance Association, was appointed secretary of the Subcommittee.
The Polish Insurance Association applies to the Minister of Finance for exempting insurers from asset tax. This concerns the exemption of funds which would be accumulated under Employee Capital Plans (PPKs) and new agreements on occupational pensions (PPEs).
The new version of the Act of 24 May 2018 on PPKs lists insurance companies as institutions entitled to manage PPKs, yet the lack of asset tax exemption practically eliminates Polish insurers from all regulated and collective forms of long-term saving in Poland. Insurers are effectively burdened with asset tax exceeding 0.5226% per year. The act recognises the tax basis as all assets of insurance companies, i.e. also the funds which would be accumulated under Employee Capital Plans. The tax rate is therefore, higher than the suggested limit of management costs in PPK agreements, amounting to 0.5%.
Mainstreaming is key for PPKs
Exempting funds accumulated under Employee Capital Plans (PPKs) from asset tax will enable companies to participate in the programme which, in turn, will have a positive impact on the implementation of the main objective of PPKs, namely to become mainstream. Insurers have broad access to entrepreneurs with whom they have established long-term business relationships while protecting their property, offering group insurance, health insurance or occupational pensions. Insurers also have solid partnerships with employees of various companies and institutions, mainly thanks to cooperation with trade unions or directly with individual organisational units responsible for the property or staff management areas. Insurers, through their relationships with employers, are also able to provide savers with educational support, by promoting the advantages of long-term savings through PPKs.
Possible insurance coverage
It should also be stressed that, as part of the 0.5% management fee collected, insurers will be adding insurance coverage to the pension product. Such a structure, in our opinion, will make it easier to convince employees not to abandon their payments into PPKs, as the product will not only fulfil a long-term retirement saving objective, but it will also provide specific protection, which will make the product more attractive, especially for young people. Tax exemption of assets accumulated under PPKs will be neutral in terms of the State budget. Investment fund societies and general pension societies are not subject to asset tax, so the lack of asset tax exemption for insurers in the area of PPKs will render the plans manageable solely by investment fund societies and general pension societies.
In practice, the current version of the bill also excludes insurance companies from operating occupational pensions (PPE). The act introduces a limit of costs and fees collected by financial institutions amounting to 0.6% of the value of managed funds per year, which, assuming that asset tax of 0.5226% is retained, will render the maintenance of PPE economically unprofitable for insurers. Consequently, PPE agreements will only be concluded by financial institutions that are not burdened with asset tax. Within a certain timeframe (probably in about a year), all occupational pensions run by insurers today, which represent about 60% of all occupational pensions, will be taken over by investment fund societies and general pension societies, which are not subject to tax.
Therefore, the decision not to exempt insurers from asset tax in a part relating to assets accumulated under PPK agreements and new PPE agreements means the elimination of Polish insurers from all regulated and collective forms of long-term saving in Poland.
More than 80% of insurers believe that the future of the market belongs to organisations that have invested in innovation and digitalisation, demonstrated in the ‘Digitalisation of the insurance sector in Poland’ report, prepared by Accenture for the Polish Insurance Association. Work on the implementation of smart home and smart city technologies, which enable, among other things, preferential valuation of premiums and better tailoring of offers to client’s needs, has already begun.
Digitalisation –Polish insurers’ strategies
In a similar way to their foreign counterparts, Polish insurers focus their digitalisation efforts client relationships and internal processes, as shown in the report prepared by Accenture. On the basis of the study conducted for the Polish Insurance Association, three types of companies operating in the insurance market were identified, taking account their approach to digitalisation, innovation, client experience and the implementation of new technologies in various business areas.
The first group comprises the so-called ‘pragmatic traditionalists’, who are focused on existing channels and solutions. Nonetheless, they are interested in new trends, so that they are able to smoothly adapt to market changes, if necessary. They claim that the role of new technologies is to relieve agents and improve their work. Intermediaries could devote the saved time to building relations with clients and increasing sales. This would help to reduce operating costs and thereby enhance company competitiveness.
In contrast, the second group, so-called ‘digital followers’, constantly analyses changing clients’ needs and new technologies. They are frequently the ones to set trends, by implementing innovative solutions in all areas, even in those where demonstrating obvious financial benefits in the short term is difficult. They invest in multichannelling, artificial intelligence and analytics.
The last group comprises so-called ‘diversified partners’, who use digital initiatives on a smaller scale, often alongside their core activity. Their primary goal is to acquire knowledge and experience and also to prepare for the creation of or participation in ecosystems with other digital players. They mainly focus on cooperation with their business partners, by building interfaces adapted to their systems. ‘Polish insurance companies have taken an intelligent approach to digitalisation. Instead of investing in every technological novelty, they focus rather on initiatives and innovative ideas which are reasonable from the point of view of their business strategy and goals for the upcoming years. In their efforts, they face increasing difficulties to recruit digitally literate employees. As a result, their use of digital technologies such as artificial intelligence, cloud computing or advanced analytics is less widespread than among surveyed insurers abroad’, said Łukasz Marczyk, Insurance Industry Lead at Accenture Poland.
Important trends – smart home and smart city
‘Insurers have been keeping track of technological changes and gradually implementing them in their companies for several years. The changes are visible in new products, such as cyber insurance, but also in tools enabling better risk assessment and valuation of premiums, for example telematics solutions which use electronic sensors to transmit ongoing information, which is crucial for the object of insurance. This is one of the most important trends of digitalisation in insurance. In Italy 17% of motor insurance policies already use telematics technologies. We expect the trend to develop in other European countries. Some insurance companies introduce this type of solutions also in Poland’, explains Mariusz Kuna from the Polish Insurance Association. She adds ‘The benefits of new technologies include the reduction of loss ratio, access to data enabling better risk assessment or location of clients. The challenge faced by companies in the Polish market while implementing telematics is mainly the high cost of installation of telematics equipment in relation to the premium on civil liability insurance of motor vehicle owners (OC).
Telematics is an example of pursuing the smart city and smart home idea. It involves installing sensors on objects of insurance, cars and apartments in such a way as to enable the insurer to carry out ongoing monitoring of parameters which are crucial from the point of view of safety and risk assessment of items forming the object of insurance (apartments, infrastructure, cars). An example of this is humidity and temperature measurement in apartments. Should the measurement results show any rapid changes, it is possible to react in a quick and appropriate manner, such as sending aid if fire or flooding has been detected.
Cyber risk insurance is another innovation. The purpose of the insurance is to protect Internet users, enterprises and institutions against computer viruses, hacker attacks or fraudulent activities of employees. Many insurers are considering the introduction of this type of products in the forthcoming years. Taking into account the level of innovation of the products on offer, the majority of Polish insurers are not looking for technical novelties or new types of products. From their perspective, the improvement and simplification of their current product range is of key importance.
Increase in client satisfaction thanks to self-service
In subsequent years, more and more insurers will be trying to fully or party reduce paper documentation. Thanks to technological developments, clients will be given, among other things, a wider range of possibilities to report loss on their own. This will be done thanks to on-line forms for reporting claims, self-service portals or mobile applications (e.g. a mobile application for performing visual inspection, or sending ‘push’ notifications containing information on the status of a loss). Solutions like these have already been implemented in Switzerland by Zurich Insurance Group. This enabled the company to reduce its loss adjustment process from 52 minutes to a mere 5 seconds, which, in turn, resulted in approximately 40,000 man-hours saved per year.
Polish companies agree about the increasing importance of data in their organisations. An important development direction is obtaining data from new reliable sources. One of the ways of obtaining valuable information is the use of public data sets. Ensuring that data management is effected properly requires the implementation of advanced analytical solutions that are also used in other business areas, such as in risk assessment. So far, only a few Polish companies have reached an advanced level of data and analytics use.
About the study
The main aim of the study conducted by Accenture is to present the most important trends relating to the level of digitalisation of the Polish insurance market and to indicate barriers which might stand in the way of further digital transformation of the sector. The findings are based on a qualitative study which was carried out in the form of a discussion in focus groups moderated by experts from Accenture. People in charge of all areas of activity of an insurance company and holding decision-making functions in organisations were invited to join the discussion sessions. The study utilised a mechanism of dividing digitalisation-related aspects into ‘Go Digital’ and ‘Be Digital’ sections, which pertain to, respectively, the digitalisation of client experience and the digitalisation of operations inside an organisation. A total of 13 insurers were surveyed during the discussion, which makes up 73% of life insurance market coverage and 65% of property insurance coverage.
You are invited to read the report by the Polish Insurance Association, describing the bancassurance market in Poland after Q2 2018. The premium obtained in the bancassurance channel amounted to PLN 3.2 billion in Section 1 and almost 1 billion in Section 2.
Almost 2.3 million Poles have additional health insurance. According to Polish Insurance Association data, this is 14% more than last year. This figure is likely to grow, as studies by the Polish Insurance Association show that as many as 60% of employees are interested in a health package.
Employee health insurance
Not only is the number of insured persons rising, but also the amount we spend on coverage. During the first half of 2018, we spent PLN 386.5 million on private health policies, which is 19% more than a year ago. ‘The group insurance market is growing steadily since more and more employers recognise the value of a healthy employee. It is also worth noting that the value of premiums is rising quicker than the number of insured persons. This may indicate an interest in more comprehensive health packages’, says Dorota M. Fal, adviser to the Management Board of the Polish Insurance Association.
Poles want quicker services
A survey conducted by the Polish Insurance Association in September this year confirms that private health packages generate massive interest from employees and employers. Moreover, almost 80% of the survey participants believe that an employer should provide cyclical medical appointments during which general health is examined and recommendations on lifestyle are given.
Slightly more than 38% of the survey participants use only health services financed by the National Health Fund (NFZ). Half of the respondents use both public and private medical care. Taking out private insurance is mostly motivated by the willingness to reduce the time of waiting for a service.
In the first half of 2018, insurers paid out PLN 20.7 billion worth of compensation and benefits to claimants and clients. This is 5% more than the previous year.
Key insurance market figures after Q2 2018
- PLN 70 billion of insurers’ assets are funds supporting the economy and public finances by domestic bonds and other fixed-income securities.
- PLN 17.2 billion of insurers’ assets are funds invested on a long-term basis in shares of the companies from the Warsaw Stock Exchange and other variable income securities.
- More than PLN 600 million of income tax to the State budget.
- Insurers collected PLN 32.1 billion in premiums, which is 1.7% more than the year before.
Motor insurance market
- The average premium on civil liability insurance of motor vehicle owners (OC) in Q2 2018 amounted to 574.8 and was the same as in Q2 2017 (annual contracts).
- In six months, insurance companies adjusted PLN 619.6 thousand worth of claims under civil liability insurance.
- The average premium on Auto Casco policy in the first half of 2018 amounted to PLN 1225.7, which is 4.6% more than the year before.
- Within half a year, insurers adjusted PLN 382 thousand worth of claims under comprehensive Auto Casco (AC) insurance.
‘The increase in prices in the civil liability insurance (OC) market slowed down considerably. Payment figures are rising, yet less dynamically than 2–3 years before. This means that no new titles for payment appeared. There is an important act regulating the activity of so-called insurance claim companies ahead of us. Despite the fact that it does not directly concern the scope of insurer’s liability, it may affect the civil liability insurance market. We are also waiting for the effects of work on regulating remedies. Predictability in this area would allow significantly greater stability of prices in the future’, says J. Grzegorz Prądzyński, President of the Management Board of the Polish Insurance Association.
Non-life market (Chapter 2 excluding motor insurance)
- The total premium on non-life insurance (exclusive of motor insurance) amounted to PLN 9.1 billion and was 11% higher than a year before.
- The following types of insurance have the largest share in the premium on the non-life market: insurance against fire and other natural forces (PLN 1.8 billion), insurance against other property damage (PLN 1.8 billion) and civil liability insurance (OC) (PLN 1,2 billion).
‘The first half of the year was marked by significant damage in agriculture, therefore compensation in the ‘other property damage’ group increased by as much as 60%. Agricultural insurance in the context of climate changes is one of the most important challenges for the insurance market in the upcoming years. We have to remember, however, that a good policy is only an element of risk management. Insurance supports but does not replace a comprehensive strategy’, explains Andrzej Maciążek, Vice-President of the Management Board of the Polish Insurance Association.
Life insurance market
- Value of the premium on life insurance amounted to PLN 11.1 billion (a decrease of 8.8%)
- The value of benefits under life insurance amounted to PLN 10.8 billion (an increase of 4.2%)
‘Parliament will soon begin to work on the act on Employee Capital Plans (ECP). On the one hand, the plans will become a new product for insurers, on the other, however, the years of experience gained through offering occupational pensions will pay off. Thanks to their great contacts with employers, insurers may play a key role in making long-term saving among Poles a common thing’, says J. Grzegorz Prądzyński.
Financial results of insurers
- The net profit of life insurers after Q2 2018 amounted to PLN 1.3 billion and was 8% higher than a year before.
- Non-life insurers ended Q2 2018 with a net profit of nearly PLN 2.5, which means a decrease by 3.4% (nearly half of which is made up by a dividend from PZU Życie SA to PZU SA, already included in last year’s life insurers’ net profits)
The technical result on life insurance amounted to PLN 1.5 billion and was by 1.2% lower than a year before. The technical result of non-life insurers amounted to PLN 1.3 billion and was 18.3% higher than a year before. The income tax payable by Polish insurers at the end of Q2 2018 amounted to PLN 606 million and asset tax, approximately PLN 360 million.
In accordance with the data collected by the Polish Insurance Association in 2017, insurers covered receivables (the sum of credit limits) to the amount of PLN 149.7 billion. Accounts receivable coverage was 2% higher than the year before and 5% higher than in 2015.
Fewer insured exports
The amount of insured turnover in 2017 amounted to PLN 488.1 billion, with domestic turnover at PLN 377.8 billion and export turnover at 110.3 billion. High dynamics in comparison to previous years are observed in the amount of insured domestic turnover. In relation to 2016, the dynamics ratio is 106% and in relation to 2015, 115%. Things are different when it comes to the dynamics of export turnover, which in 2017 were at the same level as in 2015, while in relation to 2016 the dynamics ratio was a mere 96%. This decrease results mainly from the reduced demand of companies for export receivables insurance.
Accounts receivable coverage is crucial for the economy
Accounts receivable insurance schemes are one of the most important instruments of safe business. According to the Central Statistical Office (GUS), the total amount of trade credits extended between companies in 2016 was PLN 384 billion and 38% of the total amount of receivables was insured. That means that insurers are the second, besides banks, pillar securing the influx of money into the economy. The total value of short-term bank loans in 2016 was PLN 157 billion (Central Statistical Office data, ‘Balance of the financial results of economic operators in 2016’), whereas domestic exposure of accounts receivable insurance in the same period exceeded PLN 95 billion.
More compensation paid
One important problem addressed by account receivable coverage are the increasing payment backlogs and deteriorating financial and competitive situation of some companies due to increased production and service provision costs. The Polish Insurance Association estimates that in 2017, insurance companies paid out compensation in the amount of PLN 407 million. The Polish Insurance Association estimates that in 2017, insurance companies paid out compensation in the amount of PLN 407 million, which is 28% more than in 2016 and as much as 74% more than in 2015. Continuing high loss ratio dynamics may force insurance companies to verify their risk management policies and widen accounts receivable coverage.
Paweł Szczepankowski, CEO at Atradius in Poland and Chairman of the Accounts Receivable Insurance Subcommittee of the Polish Insurance Association, explains the notion of accounts receivable coverage. You can also read about it on the Polish Insurance Association blog.
In Q1 2018, insurers paid out PLN 10.5 billion worth of compensation to claimants and clients. As usual, most payments and adjusted claims concerned motor insurance.
Key insurance market figures after Q1 2018:
- PLN 70.3 billion of insurers’ assets are funds supporting the economy and public finances by domestic bonds and other fixed-income securities
- PLN 16.6 billion of insurers’ assets are funds invested on a long-term basis in the shares of companies from the Warsaw Stock Exchange and other fixed-income securities
- PLN 312 million of income tax to the State budget
- Insurers collected PLN 16.3 billion in premiums, which is 1.9% more than the year before
Motor insurance market
- The premium on motor civil liability insurance (OC) amounted to PLN 3.7 billion (6.8% increase)
- Gross compensations and benefits under motor civil liability insurance (OC) amounted to PLN 2.3 billion (2.9% increase)
- Gross premium written on comprehensive Auto Casco (AC) insurance amounted to PLN 2.1 billion (12.5% increase)
- Gross compensations and benefits under comprehensive Auto Casco (AC) insurance amounted to PLN 1.3 billion (9.2% increase)
‘After Q1 2018, the market shows a slowdown in the increase in premiums and payments. The question remains open as to whether this is a permanent trend. In this context, the recent justification of the resolution of the Supreme Court with respect to indirectly injured persons is very important. The Court precisely stated that situations where one can apply for remedy if the family bond with a victim of a road accident has ceased are exceptional’, says Grzegorz Prądzyński, President of the Management Board of the Polish Insurance Association.
Non-life market (Chapter 2 excluding motor insurance)
- The total premiums for non-life insurance (exclusive of motor vehicles) amounted to PLN 4.7 billion and was 6.5% higher than the year before.
- The following types of insurance have the biggest share in the premium in the non-life market: insurance against fire and other natural forces (PLN 1 billion, YoY decrease by 1.4%), insurance against other property damage (PLN 688 million, increase by 15.6%) and civil liability insurance (OC) (PLN 641 million, YoY increase by 10.8%)
‘Fortunately, the first quarter of 2018 did not bring many major weather-related incidents. However, forecasts talk about possible violent storms and heavy rain. Insurers are financially and logistically prepared for such phenomena, still we hope that we will not be given the chance to verify that’, explains Andrzej Maciążek, Vice-President of the Management Board of the Polish Insurance Association.
Life insurance market:
- Value of the premium on life insurance amounted to PLN 5.7 billion (7.4% decrease)
- Value of benefits from life insurance amounted to PLN 5.4 billion (3.9% decrease)
‘Life insurers are primarily waiting for the final form of the Act on Employee Capital Plans (ECP) and a decision on asset tax exemption for funds accumulated from long-term saving. I have no doubt that the objectives of the ECP should be implemented with the participation of insurers. Not only are they experienced in asset management, but they also have great contacts with employers, which will contribute to significantly raising awareness about the ECPְ’, says J. Grzegorz Prądzyński.
Financial results of insurers
- The net profit of life insurers after the Q1 2018 amounted to PLN 470 million and was 3.1% lower than a year ago.
- Non-life insurers ended Q1 2018 with a profit of PLN 588 million, which means an increase by 6.2%).
The technical result of life insurance amounted to PLN 679 million and was 6.3% higher than a year before. The technical result of non-life insurers amounted to PLN 691 million and was 6.3% higher than a year before. The income tax payable by Polish insurers at the end of Q1 2018 amounted to PLN 312 million and asset tax, approximately PLN 180 million.
Table of results
Chart with the results
You are invited to read the latest report by the Polish Insurance Association, describing the bancassurance market in Poland after Q1 2018. The premium obtained in the bancassurance channel amounted to PLN 1.7 billion in Section 1 and 0.47 billion in Section 2.