FIAR 2018 - Motor Insurance Conference (I & II): with the right use of technoloogy, clients' expectations and MTPL insurer's profitability may go hand in hand

The first and second parts of the Motor Insurance Conference taking place at FIAR 2018 focus on the new MTPL Law in Romania and the way it changed the market after almost 1 year of implementation, as well as the consequences of the new legislative framework and the operational challenges this brings, but also the most suitable solutions for balancing regulation, insurers' appetites and customer expectations on the MTPL market.

Oleg DORONCEANU, Director, XPRIMM International
  • In 2017, GWP on the Romanian general insurance market totaled approximately LEI 7.7 billion, of which 75% accounted for motor insurance (Motor Hull and MTPL)
  • MTPL accounts for 50% of the Romanian general insurance
  • Of the total LEI 4 billion paid by insurers for 2017 damages, on the general insurance segment, more than half accounted for MTPL (55%)
  • The first 2 insurance companies that activate on the MTPL market own more than 50% of de subscriptions on this segment (CITY Insurance and EUROINS)
  • The average premium on Romania's MTPL segment, in 2017, was approximately LEI 700, while the average damage was LEI 7.000
Mariusz WICHTOWSKI - General Manager, Polish Motor Insurers' Bureau
  • Motor insurance often represent the main part of non-life insurance. In most of the cases, it's not something voluntary, but mandatory products: people pat for these products, although they're not enjoying this. In most of the cases, the activity on the motor segment it's not profitable neither for insurers. We must not forget that insurance is a type of activity which needs a high level of trust. How can we insure people, if they don't trust us?
  • We, insurers, are, most of the times, victims of the financial markets in which consumers loose their trust. We, insurers, will be to blame, not a bank etc. Every day, we must fight against negative reputation the financial market has. It's up to us to change this perception and we should start with these mandatory insurance segments.
  • In many countries, the motor business is not very profitable - how do we make it more profitable, how do we make more money, how do we satisfy our customers?
Florin GOLOVATIC, Director, Supervision and Control Direction, ASF - Financial Supervisory Authority
  • Let's recall the main figures of 2017 regarding the motor insurance market, which has an important share in the whole Romanian market.
  • On December 31st 2017, 9 insurance companies were offering MTPL insurance and 14 insurance companies were offering Motor Hull insurance.
  • Those two types of insurance represent 75% of the total general insurance market in Romania, a percentage increasing every year.
  • Regarding the combined ratio of MTPL, 2017 was the first year it dropped under 100%, to 99.46%.
  • On Motor Hull, the combined ratio remains at a similar level to the one in 2016, 107.15%.
  • There are many discussions on MTPL's profitability, but figures show that Motor Hull also has profitability issues.
  • Number of MTPL contracts: we can notice an increase of up to 9.9 million new contracts in 2017. It's true that we have a significant increase in contracts concluded for sub-annually periods, after the entry into force of the MTPL Act.
  • The average premium is down compared to 2016, the annual average premium on MTPL being LEI 695.
  • In 2017, we also had an increase of both the average damage and the number of claim files on MTPL.
  • On Motor Hull, in 2017, the GWP volume is up compared to last years, LEI 1.9 billion, 1.19 million contracts being concluded.
  • A new element introduced by the new MTPL Act is the Direct Settlement. At the end of 2017, there were 64.430 contracts in effect. 67.619 Direct Settlement contracts were concluded in 2017, generating GWP worth LEI 5.1 million.
  • The annual average premium on Direct Settlement was LEI 96.
  • On this new line of business (Direct Settlement), there were, in 2017, 102 files in reserve and 63 paid files. The average claim paid was LEI 5.509.
Madalin ROSU - President, BAAR - Romanian Motor Insurers Bureau
  • 65% of the 7 milion cars in Romania are older than 10 ani.
  • 90% of Romania's roads have a single lane.
  • 25% of severe accidents are caused by young people with less than 1 year of driving experience.
  • Lately, we can witness mini-law abuses from repair shops: for example, we can see workmanship hours of LEI 800 without VAT, twice as much as in Germany - these are isolated cases, but they are becoming more and more often encountered.
  • The effects of limiting, by law, MTPL tariffs in 2016 - a unique exercise in Europe, in this form -, will be felt later. For example, we already see that the average premium is dropping, while the average damage is growing.
  • Law no. 132 of May 31 2017 (the new MTPL Law) has brought both positive and negative aspects. Among the positive elements, is that, finally, we have a law that regulates the MTPL segment. Another positive aspect: the damage settlement on bodily injuries and death (although this is not yet completed).
  • There is also a number of negative aspects on the MTPL law: there are still many loopholes, both in law and rule, which allow those law abuses or exaggerations from some actors.
  • Regarding the validity of the MTPL policy: I don't think it's normal to have monthly policies; a client may forget to renew his policy - so, I don't see this as a positive aspect.
  • Another novelty brought by law: the first MTPL payable in installments - can lead to additional costs, both for the insurer and the consumer, at some point. Ultimately, this only creates a slightly higher operating risk in the policy selling segment.
  • Introduction of Direct Settlement: for now, this aspect is working, there is a market-based protocol that clearly sets out payment deadlines and penalties; so far, we haven't heard of direct settlement money recovery issues.
  • A positive matter is the introduction of the word telematics in law, because it creates the premises that, in the future, insurers can count on such solutions.
  • The reference premium on MTPL segment: at this moment, it's decreasing.
  • Prima de referinta pe segmentul RCA - in momentul de fata, aceasta este in scadere.
  • High-risk clients - until now, BAAR received no cases.
Cees WERFF - CEO, CCN-Claims Corporation Network, Netherlands
  • There are two important things when it comes to MTPL: clients' expectations and insurance company's profitability. These come hand in hand, from my point of view. We can take steps to increase the quality of customer's experience and we can also increase, at the same time, the profitability.
  • Currently, the client cotrols where the interaction takes place. He wants to be "on the wheel". This is the base of customer's experience and expectations - to remain in control.
  • Did clients's expectations due to technology? No, we've always used technology. But technology changes business approach.
  • Technology is also used in claim compensation processes. If a client wants to make a claim (classically), the process is tedious, contact the call center, send a form with 10-20 questions... it's a long process... from the moment when the damage is advised and until the meeting with the damage inspector, 6 weeks may take. Does this help with client satisfaction? No. but it raises costs.
  • For claims, a platform may be used. The user is automatically asked "Do you have a damage? Can we help you?", "When can we pick up your car?" The client can select the date and hour when the car may be picked up and taken to a service and eventually choose if he or she wants to rent another car. A driver comes and takes his car to service. During the repair, the client receives periodic information about procedures' status and photographs are taken during the repair. There are also payment options. Everything is under client's control - the exclusive purpose of increasing the satisfaction of the client. Also, the customer chooses when his car may be returned.
  • We've launched this program, with a 10% reduction of damage cost. Who wants to implement this process can have the app in Romanian language. The system works permanently.

Alexandru GRIGORESCU - Specialist, Motor Insurance Section, UNSAR
  • Currently, Romania ranks third in the CEE MTPL insurance market, with a market share of 10.5% (premiums of EUR 837 million), after Poland and Czech Republic.
  • We can see an excesive dependence on the motor portfolio market, especially MTPL.
  • The good news is that, overall, there is a growing tendency for the Romanian insurance market and the insurance companies have subscribed GWP (AG and AV) worth LEI 9,7 billion, a 3.5% growth compared to 2016.
  • Of the total, the general insurance segment holds a share of 79.17%, with GWP worth LEI 7,68 billion.
  • Motor insurance accounts for 74.3% of GWP for general insurance and 58.86% of total GWP. In this category, Class A3 (Motor Hull) has a GWP volume of LEI 1,89 billion, while the A10 Class has a GWP volume of LEI 3,82 billion (3,7 billion - MTPL).
  • The average MTPL damage paid for bodily injuries in 2017 decreased by 11%, compared to 2016' same period, while the average MTPL damage paid for material damages decreased by 1%.
  • At the same time, on the whole market, the annual average premium decreased by about 14% in 2017 compared to 2016, with a value of LEI 695.
  • We've noticed a continuous process of market stabilization and that an important indicator - the number of petitions and complaints -, dropped by 54% last year. Petitions on MTPL and Green Card have fallen by 31% - that's gratifying.
  • In this context, the insurance market still feels the current legislative changes. In the last two years, we had two laws and two new rules, coming in at a high speed. This year, we'll have new challenges - IDD and GDPR.
  • The challenges of the motor insurance industry for 2018: administration expenses capped at 25%; less honest practices of reparing units of charging the amount of car damage over the average market price; MTPL on any multi-month period, between 1-12 months; the continuous and accelerated aging of the Romanian auto fleet; technological advances (hybrid and electric vehicles, telematics); insurance products adapted to new technologies.
  • Among UNSAR's objectives: increasing the interest for the optional motor insurance, increasing the confidence in the industry, the availability for dialogue and collaboration, for a much bigger consumer protection.

XPRIMM Circle of Debates: Balance sheet at almost one year an since the introduction of the new MTPL law in Romania

Florin GOLOVATIC - Director, ASF
  • Regarding the combined ratio of the MTPL damage, it's a good sign that we have this indicator under 100% for the first time in this segment's history after the price liberalization.
  • From the stability point of view, many market situations have been resolved. There are several factors that can influence this indicator, such as the evolution of the damage, price evolution in the market. But I think that we have to focus on refer to price, a little bit, and it should be seen if there are technical means or other methods to help the industry. We need to think through which means cthe client's satisfaction can be increased - he will pay the price and we have to convince him that it is worth paying.
  • There were discussions about this very short 3 day period of MTPL damage report. There are 3 days because, after discussions, this was the demand coming from the consumers. This does not mean that insurers can not make this report faster.
  • The possibility to make a finding using electronics means appears as something new and also as a permission. But even before the law was not forbidden, insurers could use technology.
  • The reference price is indicative. We can not talk about violations. They are calculated based on available market information, related to damages, capturing the damage events in the relevant segments used in this calculation. Reference rates have seen both increasing and declining developments.
  • 1 month MTPL policy - Here, the role of intermediaries is essential. It is your duty tu persuade the client to renew his policy after that month.
  • ASF does not have the possibility to sanction or to take action if there are motor vehicle owners who do not conclude their insurance policies.
  • According to the new MTPL law, there is a possibility to suspend the MTPL insurance policy. Therefore, the degree of coverage in insurance as an indicator becomes, in this context, less relevant.
Viorel VASILE - President, PRBAR
  • Our position towards the consumer is extremely important: in my opinion, the consumer has the right to choose where he wants to take the damage report - whether he wants to take it at the insurer, service or broker.
  • I believe that, if we want to bring changes into the market, we have to start from very clear principles: not inventing the hot water, but to see what's happening on the Western market and to import some elements from there. Another principle that we should rely on is that the consumer has to choose where to take the damage report.
  • We can also copy the process that exists on the insurance market in the damage segment, in order to have insurers, brokers and brokers of damages. But these brokers of damages must be licensed by someone. Also, the insurer should be able to decide whether to cope with the damage on his own, or to decentralize the damage claim.
  • MTPL is a fairly difficult insurance product, it is a segment in which, if you want to make profit, you have to make volume. We should worry about this seizure of the MTPL market of 3 players on the market, but, after all, we are talking about a free market, of less than 100% damage. We need to make fine adjustments - for example, we can make changes in a way in which the consumer chooses the damage report side.
  • It's complicated to convince the client not to conclude 1 month policies, as long as we're talking about the same price, divided by 12. But most clients renew their monthly policies.
Madalin ROSU - President, BAAR
  • 3 days for damage report is a strange term and such a term should not be in the law. I, the insurer, may want to take the damage report in 5 seconds.
  • ASF introduced the possibility of damage report by electronic means. We have the legal framework to do so. From tomorrow, anyone can use applications, a direct relationship between the client and the insurer. There are solutions, we have to find the right cost, the facilities we can offer to the market. The hardest part will be to convince someone to download and use a mobile app. We will succeed, but we need time to find smart solutions. We need to meet more often and find solutions (for customers' benefit) to optimize and not to slow down the activity.
  • There must be a welded partnership between insurers and brokers.
Mariusz WICHTOWSKI, General Manager, Polish Motor Insurers' Bureau
  • When it comes to motor insurance, it is clear that, from one country to another, we have different problems and there are no unique solutions. It is important to remember that it makes no sense to copy solutions from one country and bring them in another country, because this can create additional problems instead of solving the existing ones. We must be clever enough to adapt the existing solutions.
  • The main purpose of any European regulation is to harmonize the level of the consumer protection in all countries.
  • It is necessarily to underline again how important MTPL and the overall insurance market are. In all countries and all markets, this businesses creates certain problems, which are different from country to country.
  • The Polish authorities made, in the past, a very important remark: because we are being responsible for the customers' rights and customers' protection, we are responsible to protect the insurance companies and secure their profits, because only if they are profitable they can offer security and provide the necessary cover to their clients.

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