FIAR 2023 - The International Insurance Reinsurance Forum started on Monday, June 26, with the Insurance Market Trends Conference, which analysed the main changes and challenges faced by the Romanian and European insurance markets, from macroeconomic trends and the impact of inflation on insurers, to how Artificial Intelligence and ChatGPT will shape the future of insurance.
The conference was supported by Future Healthcare Group as Strategic Partner, as well as CITR, BRD Asigurari de Viata and NN as Partners.
Main statements:
PART I
Radu CRACIUN, Economic Analyst, Founding Member of the Association of Banking Financial Analysts, President of the Management Board, BCR Pensii
- I personally do not believe in an economic crisis. People often confuse recession with crisis. Recession is part of economic normality and does not necessarily mean a crisis. It is part of the adjustments that are normal in any economy.
- I don't think Romania will face such an economic crisis. I believe that Romania might benefit from 3 very important opportunities, and the first one of these is related to the process of friendshoring (repositioning of global business along the lines of strategic geopolitical friendships). Then, the second big opportunity is represented by PNRR - we are talking about tens of billions of euros that could come into the Romanian economy to contribute to the development of infrastructure. Finally, the third big opportunity is the reconstruction process in Ukraine. Ukraine will need over 450 billion dollars for reconstruction and it is logical that the countries that are closest to Romania should be part of this process.
- The risks for our country are not external, they are more internal. What are the internal threats? In the short term it is the budgetary imbalance that requires a series of measures that Romania's governments have not been able to take alone until now, all the adjustments in history have been made with IMF funds.
- Romania may be plunged into a crisis when social tensions explode and cannot be managed.
- On the other hand, we also have a problem on the labour market. This problem will not be solved very soon. The challenge for Romanian companies will not be how to lay off people or downsize, but how to cope with increasing demands and products.
- For the insurance market: Romania's economy will not go into recession, but there will be a slowdown in economic growth.
Alexandru CIUNCAN, President & General Director, UNSAR
- In 2022, the insurance industry in Romania represented approximately 1.3% of GDP. Romania is still far from the European average in terms of insurance penetration in the country.
- In 2022, the gross written premiums of Romanian insurers totaled EUR 3.7 bn, an increase of 19% compared to the previous year. Health insurance has been the "star" of the market, recording some of the highest increases.
- In 2023, we expect to see increases in claims paid on the motor segment, as well as on the fire and natural disasters segment.
- On each calendar day in 2022, the Romanian insurers paid claims of almost EUR 5 million, which is about EUR 200,000 per hour.
- Challenges for the insurance industry in Romania at the moment include: reputation, protection deficit, amendment of Law 132/2017 - MTPL, as well as the frequency of road accidents.
- According to the results of the latest UNSAR - IRES barometer, Romanians are primarily concerned about a financial crisis that may affect their income. Inflation and road accidents complete the top of the most important risks that the Romanians fear in 2023.
- 48% of Romanians say they are well informed about insurance (self-reported level of information). The barometer results also indicate that 42% of Romanians are more interested in home insurance in 2023, 39% are more interested in life insurance, 33% are more interested in health insurance - a change from 2022, when life insurance ranked first in terms of interest.
- UNSAR is continuing its efforts to educate the general public, and attract young people to the insurance domain. UNSAR is also launching new road safety initiatives, through the Road Safety Coalition.
Virgil SONCUTEAN, CEO, ALLIANZ-TIRIAC Asigurari
- Whether 2023 will be a restart year or not for the Romanian insurance market remains to be seen. But it is certainly a year that offers us the opportunity to learn some very important lessons that we may have neglected in the past.
- We also need to talk about the legislative framework - in a market such as MTPL, where insurance is compulsory for the customer, there is an imbalance between the existing regulation for insurers and that for the motor repair area, where primary legislation is lacking.
- The restructuring of the insurance market should be done in a way that is as balanced as possible for all the actors involved.
- As far as health insurance is concerned, it is very important to avoid unsustainable growth. I think the starting point is very small and that is why health insurance is not yet very visible. This segment is growing, it has a double digit growth rate - and in our portfolio health insurance policies are growing.
- We have to be careful about how we define the market and be fair: in Romania, there is an "exotic peculiarity", represented by the existence of medical subscriptions. The Romanian consumer accesses both health insurance and medical subscriptions as financial products. Therefore, we should somehow "cumulate" the two products when talking about information and customer interest, because Romanians access private health services through both products.
- We don't know how long medical subscriptions and health insurance will coexist, but if we follow trends in markets where the situation has been similar in the past, we can say that the future is for health insurance.
Mihai TECAU, CEO, OMNIASIG VIG
- The Romanian insurance market has restarted before, this would not be the first time it does so, but I hope that this time we will start to move towards that insurance market we all envision. I think all the ingredients are on the table - we have the legislation, we have the products and the distribution, the market potential is still there.
- It is very important to know that there are insurance companies in the market that want to grow organically. This is our objective, the objective of the insurance market: we have to grow organically, not from the remnants of other insurance companies.
- We will have to cultivate confidence both in ourselves, in the companies, and in those who benefit from insurance.
- Investment and European funds are needed for the development of Romania.
Adrian MARIN, CEO, GENERALI Romania
- For the MTPL market, we are talking about a restructuring rather than a restart and I believe that the evolution of facultative insurances should not be ignored because of the MTPL situation.
- We have been seeing for some time now that the motor sector is changing its share compared to the non-motor sector. It remains to be seen whether the results of the first quarter will decrease, compared to a trend that has so far been the reverse. When I say motor, I mean MTPL and Motor Hull.
- I am convinced that in the first quarter we will also see increases in property, health, and warranty insurance.
- MTPL and Motor Hull - 1.2 billion euros were paid out last year. This is a huge pressure for many stakeholders. I would put the cause first - reducing the frequency of claims as the main factor in reducing the price.
- I think there should be a more balanced weighting between motor and non-motor, volatility could be more easily avoided
Gerke WITTEVEEN, CFO, NN Life Insurance & Vice President of UNSAR
- Life insurance is a voluntary product, so it is very important to listen to the consumers' needs. In this age of digitalisation we have a range of different tools at our disposal to better understand what the consumer wants.
- Compared to 20 years ago, digitalisation gives us the opportunity to create more modular products and more efficient processes
- The challenge for insurers is to adapt products every 1 year, 2 years, 5 years, keeping up with changing consumer needs
- From a consumer experience perspective, insurers are already compared to banks, to telecom companies, which have highly developed digital processes. And we, as insurers, need to reach the same level of service to consumers. We need to invest in digitalisation and IT solutions.
- It is essential to better understand consumer needs
- Tax deductibility is a very appropriate tool to reduce the protection gap in a country and to contribute to the growth of the voluntary insurance market.
Paul Dieter CIRLANARU, CEO, CITR
- We saw a shock at the CITY Insurance bankruptcy because it had become the insurer of choice for many developers who had guarantee insurance contracts and most beneficiaries said it was the only company that could issue the necessary documentation at that time
- We see two elements of pressure in the Romanian insurance market: we see a pressure from a claims perspective, especially since 2016, when we started to see, year after year, the effects of the amounts that companies are paying out against the backdrop of increasing claims, moral damages. Romania is a country with accidents that directly spill over with higher and higher amounts, more expensive litigation. Then we talk about how litigation and risk is managed.
Sorin MITITELU, Country Manager, FUTURE HealthCare
- Health insurance has recorded a spectacular growth in Romania. Compared to other business lines, a growth of 35% on health insurance is quite impressive
- If we look at the share of health insurance premiums in GDP, we are somewhere at 0.045%, and if we add medical subscriptions, we would reach 0.1%. The contribution is relatively small
- Only 15% of the working population has a health insurance policy or a medical subscription
- Health insurance distribution can also be done through non-traditional channels, especially online. We are talking about complex products, and an efficient ecosystem based on partnerships needs to be developed.
- In the future, it will be necessary to leverage every contact the customer has with any service distributor. We will see the phenomenon of embedded insurance. Bancassurance is a kind of embedded insurance because it is included alongside other financial services.
- Technology allows the development of other non-traditional distribution channels.
Nicoleta RADU, CEO, PAID Romania
- PAID Romania's effort to contribute to the opening of new growth opportunities in the area of home insurance in Romania is constant and continuous.
- We have tried to open countless channels of discussion with countless authorities. This category of objectives also included the modification of the legislation on the compulsory home insurance segment - this year, following the pressure of the earthquakes in Turkey and then earthquakes in Gorj county, and thanks to the support provided by ASF, we were able to promote several legislative changes, approved by Parliament. The changes aim to increase insurance coverage.
- Among these legislative changes are the opening of distribution by brokers, thus making the PAD policy more accessible to the general public, distribution through local public authorities (a channel not yet regulated), the introduction of the multi-annual mandatory household insurance policy (we promoted this change precisely in support of banks, in the mortgage credit segment), the introduction of policy verification points for all operations involving the Land Register, the modification of the premium (which remained the same since 2008 and which will increase from 20 euros to 130 lei), and the flexibilization of the PAID shareholding.
- The impact of these legislative changes will only be visible in 2025.
Calin MATEI, CEO, GROUPAMA Asigurari
- Groupama has been focusing on home insurance since 2010, as it is a solution for growth on the Romanian insurance market, because this segment is the place where you need quality services.
- I have reservations about how fast we will grow, because we have a combination of factors: on the one hand we have the perception of the Romanians regarding this risk and the financial capacity of the Romanianss. We have a good part of the population living on the edge of existence and I don't think they can afford to pay for a PAD + optional policy.
- In general people's perception of their safety is not very good. They think the insurance products are not useful and contracts are written in technical language. I think we need to be more transparent with the customer in communication and insurance terms and conditions
- On the MTPL market I don't know if we are talking about a restart, but a beginning of normalization, on the MTPL market we are still not aligned with the Western European markets, we need a few more years.
- I think we need a legislative change with a balance between insurers and the way compensation is made and changes in terms of amicable settlement. We need coercive measures to reduce the frequency of claims on the motor segment.
Mihai NEACSU, Partner Attorney, Neacsu & Asociatii
- The consequences of the bankruptcies on the Romanian insurance market are felt throughout the whole insurance industry.
- The EUROINS Romania bankruptcy coincided with the legislative changes on the way the FGA operates.
- The way a guarantee fund works contributes greatly to the management of such bankruptcy situations.
- I think the legislation simply needs to be better understood. Players on the insurance Romanian market are extremely professional.
- I don't think there will be revolutionary regulations in the Romanian insurance market in the near future.
- Regulation will also be a challenge for European insurers.
Cristian FUGACIU, CEO, MARSH Romania
- Health insurance in Romania has 3.5% of the market and is growing at about 35% per year and is considered an important element for market growth.
- The insurance ecosystem starts with understanding the needs of customers, meeting them and coming up with insurance products that meet the real need and in competitive conditions.
- It is also important to digitize and respond to claims when they occur. The image of insurers in the market and how they are seen by customers is also important.
- In order to have a solid insurance market we need to create a conducive environment and make sure it is attractive to the insured.
Adrian JANTEA, Commercial Director, BRD Life Insurance
- Events in the insurance market have led to less favourable conditions for life insurance. The growth of this segment implies a collaboration of all the actors involved in this phenomenon - companies and authorities.
- It is important to focus on increasing public education and awareness of life insurance.
- We need to offer new customised products, be anchored to market realities and take into account digitalization.
- Examples of innovative new niche products that could lead to growth in the life insurance segment: young medical and IT professionals
- We need transparency and competitive prices, only then we can win the trust of our customers
- It is also important that the regulatory environment is supportive and encourages innovation and consumer interests. They play an important role in promoting these types of products
- We operate in a traditional bankassurance system but that does not mean that we do not look at other partners in the market. By creating partnerships between banks that do not have this business model, and insurance companies by promoting their products to customers, these partnerships can be classified as an extended network of distributors.
PART II
Sorin MITITELU, Country Manager, FUTURE HealthCare
- Technology has been the element that has helped the transformation and evolution of society. Today, when we talk about technology, we talk about digitization
- Companies that are more advanced in terms of digitization are those that have managed to have almost double the revenue growth compared to those that have stuck to previous models, research from Boston Consulting Group shows
- Today, you can no longer have significant business growth without digitization
- Neither the insurance nor healthcare industries in the European Union are among the leaders in embracing digital technology, data from Boston Consulting Group shows
- In 2050, the proportion of the population over 65 in Europe will increase to 27% from 21% today. In Romania, the share of the population over 65 will increase to 28% from 19% today. We will therefore have a base effect, which will generate an increasing demand for medical services and health insurance.
- After the pandemic period, interest in insurance in general and health insurance in particular is growing in the European Union, a trend that is also confirmed in Romania.
Marcin PETRYKOWSKI, Group CEO, ATENDE, Poland
- We no longer live in the age of computers. We have advanced in the "Age of intelligence" - intelligent machines helping humans to take smart decisions. The use of data helps build a competitive advantage.
- When we talk about AI, we talk about a feature, a functionality that connects art and science. We are witnessing an era where machines are gaining human-like abilities.
- A game changer arrived a few months ago, a game changer which captured the attention of everyone: the launch of generative AI models. OpenAI's ChatGPT model allowed the public to actually see the power of deep learning.
- We are witnessing the democratisation of technology. OpenAI reached 1 million users in 5 days - we never had a technology that was democratizing at such a pace. There is no going back, this technology has reached a large public already.
- Generative AI was able to flourish due to the amount of data available. This technology has finally shown us how to use data - data is the new currency. These new systems are able to use the existing data.
- There are extremely high opportunities for banks and insurers in these generative AI models. In America, generative AI is no longer a hype, but is already considered essential technology that needs to be implemented.
- Generative AI is compared to the launch of the personal computer, in terms of impact and reach. The ability to use this technology is extremely wide.
- With ChatGPT, the user pays for a platform that is free of advertising. It has converted the consumer to a client ready to pay - this is the first time in the history of technology where is the actual potential to break through the monopoly held by ad-oriented companies. The client pays for a space where there is no advertising.
- AI is, by definition, extremely good at automating tedious processes and workflows.
- Insurance is, historically, quite slow at adopting technologies, but generative AI will be adopted. Why? Because generative AI can bring together different data sets, generate scenarios, reduce workflows, interpret data.
- AI can also help with risk assessment - generative AI is extremely good at analysis, projecting and identifying anomalies (potential frauds).
- AI will allow insurers to personalize products for individuals, for communities, further promoting the consumer-centric model. We will be able to approach clients in different new ways. Chatbots are becoming obsolete.
- AI will take a longer term to disrupt certain aspects, for example, the core processes of the financial sector (such as underwriting - although generative AI can simulate and generate scenarios, the human factor remains key at the final stage). Complex risks, as well as regulatory and legal compliance are other areas where disruption will take a longer term.
which will take longer to disrupt by AI.
- One needs to plan and roadmap the introduction of generative AI in their business. The implementation of AI is a marathon and not a sprint. Companies will need a clear AI strategy to implement generative AI.
- Migrating data and insuring that data input has the highest quality is one of the first steps for implementing generative AI. Other aspects include: educating the workforce, investing in infrastructure, working with Agile models, managing biases (generative AI has the tendency to be inaccurate).
- Technology is pivotal. Elements companies need to look at and implement include: big data, data management, cloud computing, programming AI models, cybersecurity and data privacy, integration and automation, process redesign.
- Challenges insurance companies need to overcome: regulation, legacy system, security, legal constraints, bias hallucinations, mindsets, transparency, data availability.
- Companies need to start now, they need to jump on the generative AI train now, they need to identify use cases in their business, to prioritize this technology on C-Level (this is a C-Level project, because it impacts the strategy of the company), to experiment, to stay agile and to not be afraid to fail. Companies also need to partner with tech (because it increases the chances to implement these technologies quickly).
Erik BARNA, Founder & Board Member, Life is Hard
- AI is creating new opportunities for the insurance industry.
- Generative AI is a creative partner, which can help us improve operational efficiency and to better answer consumers' needs.
- AI can help companies in various aspects of the business model, including in product design, marketing and distribution, pricing and underwriting. Generative AI can provide 24/7 consumer assistance, on the claims and operations segment.
- AI should be used with well-defined ethical guidelines in effect.
Riccardo CICCOZZI, Director, Market Development - Europe, AM Best Europe - Rating Services
- The global reinsurance market is well capitalized but it can still be subjected to asset volatility.
- Global reinsurance market results drive improving pricing and terms.
- The out look for the global reinsurance market is currently stable.
- War, crises, situations such as COVID have a strong effect on median return on equity (ROE).
- In the last five years, the average return on equity rate globally was 4.4%.
- Heightened natural catastrophe activity continues not test investor risk appetite.
- The global reinsurance market is also affected by aspects such as geopolitical and economic uncertainty - inflation, rising interest rates, risk of recessions. Inflationary pressures and the risk of recession make profitability targets more challenging.
- On the other hand, the global reinsurance market benefits from sustained upward pricing trends, improving terms and conditions, as well as strong demand from cedants looking for stable results and capital efficiency in an uncertain environment.
- The onset during COVId-19 lockdown and the change of pace due to conflict impacted insurers. The insurers' response included adjusting pricing, to respond to the claims inflation, revising reserves, changing contract design and adjusting fixed deductibles for XL contracts.
- If inflation continues, we need to realise that the middle class will change, because people won't have as much money in their pockets as before. Thus, we need to adapt products.
- In the face of rising interest rates , insurers need to focus on diversification and resilience.
- A Delegated Underwriting Authority Enterprise (DUAE) is a third party entity contracted by a (re)insurer to perform underwriting, claims handling, and/or administrative functions for their carrier partners. DUAE is a blanket term for Appointed Representatives, Coverholders, Direct Authorisations, Managing General Agents, Program Administrators , Program Underwriters etc.
Interactive panel
Marcin PETRYKOWSKI, Group CEO, ATENDE, Poland
- I am not aware of big insurers currently implementing generative AI. However, the pace of adapting this technology will be very quick.
- We are currently seeing a lot of investments in generative AI. There is money on the market, people are interested in supporting this technology.
- We will see more "AI on AI" projects - we are building AI tools to counteract elements generated by AI. Thus, on cybersecurity, we will use AI to counteract and intercept AI attacks.
- Data of 6 million ChatGPT users has leaked recently, and been intercepted. Vigilance on cybersecurity is essential in this new world.
Piotr SZYMANSKI, Senior Solution Development Executive CEE & Nordic | Big Data & AI, SoftwareOne, Poland
- Every single decision made by humans includes a 20% mistake risk. Adopting an AI solution means decreasing this "mistake percentage".
- There are multiple AI solutions available nowadays, not only ChatGPT, but also Microsoft's solution, for example.
- Microsoft solutions allows us to maintain the ownership of our data. Using Microsoft AI solutions will allow you to own your data.
- The ability to make better risk assessment is the biggest gain ever. Generative AI doesn't replace humans, it helps humans take better decisions.
- Data privacy and data processing are two crucial aspects. Fine tuning is necessary. You need to keep the security and protections levels at the highest possible 'settings'.
Mihai APOSTOL, CEO & Co-Founder, Insurtech
- We want to make progress especially in the area of digitalization for brokers
- We are using technology to streamline processes, especially in the area of reporting to free up people's time to focus on customer service
- We want to drive market growth, especially in the area of facultative insurance
- We hope in the future to become one of the main companies serving the brokerage and insurance market. We want to help the market grow and digitise it, because we want these processes in the insurance area to be truly automated.
Dragos STANESCU - Member, CIO Council, Country Delivery Lead for the EAME Digital Demand Generation (DDG) Project
- When we talk about premium products, for example, when we launch such a product on the market, its performance is not validated by the market. It has been tested internally, we have data, but how do we get a customer to buy it? With the help of AI, Machine Learning we managed to introduce some thresholds and set some performance benchmarks to show the customer that the product is premium.
- In terms of customer experience I see two approaches, one proactive and one reactive. The reactive and simpler one refers to chatbots and virtual assistants, and based on chatbot development, autonomous agents can be developed. For the first time customer interaction makes sense.
- There are AI-based technologies that interpret the tone of voice for employees and callers. With customer-based predictive analytics you can arrive at customised insurance packages. From this you can extract customised offers.
Florin GROSU, Co-founder and COO, TRADERION
- We need to put people first, before AI
- I believe that AI implementation should be a strategic initiative.
- Education is very important. It is important to educate our people in the company about how a properly applied AI works.
- It is very hard to innovate at speed. It's important to have a very clear strategy about how you engage your organization.
Adrian STRATULAT, Executive Director, Romanian Blockchain Association
- Blockchain complements the AI area very well.
- More than 13 years after the launch of blockchain, people still don't really understand what this technology is about.
- Blockchain comes to bring more trust between stakeholders in an ecosystem where trust does not normally exist.
- Blockchain enables the reduction of fraud and human error when entering data. If there is a human factor when processing data, there is potential for error.
- Automation of claims processing - blockchain allows the writing of smart, self-executing contracts.
- Parametric insurance - automation of certain clauses on this segment can be done via blockchain.
