Martin DIVIS, President of Czech Insurance Association, CEO of Kooperativa and VIG CR

16 April 2015 —
martin_divisXPRIMM: How do you comment the results achieved by your market in 2014 in terms of development and profitability?
Martin DIVIS:
In total, the Czech insurance market demonstrated a year-on-year growth by 1.4% and amounted to EUR 4.2 billion of written premium; however, these figures were influenced mainly by the positive development of non-life insurance. Life insurance, the key driver helping the insurance market to stay in black for several years, dropped by 0.7% last year. Non-life insurance grew by 2.3% year-on-year, mainly due to the motor insurance. In life insurance, the written premium decreased from EUR 1.69 billion in 2013 to EUR 1.68 billion in 2014, i.e. a decrease by over EUR 10 million. In parallel, the total life insurance portfolio dropping by 200,000 insurance policies is no good news.

XPRIMM: How did perform you own company in 2014 as compared with the market general trend?
M.D.:
VIG CR reached EUR 1.87 billion of written premium and succeeded in staying no.1 on the Czech insurance market. Traditionally, Kooperativa contributed the most to this achievement, as its market share amounts to almost 20%. In total, the market and VIG CR recorded a year-on-year growth by 1.4 % and 2.9 respectively, i.e. VIG CR reached more than the double figure as compared to the market. Last year, we were satisfied with the written premium figures as well as with the improvement of the overall combined ratio by 3.9 p.p. as compared to 2013.

XPRIMM: Which are the most challenging aspects of the insurers' activity, possibly in need of further improvement? What are the expected measures in this regard?
M.D.:
I would divide my answer in several areas, namely product, service and sales. As for products, I am convinced that the offer on the Czech market is fully comparable both with developed Europe and the world. We can insure everything, what our clients ask for, and the market is able to adapt flexibly to the new trends such as introduction of on-line products or increasing interest in liability insurance.

Similarly, Czech insurance companies are able to maintain high level of service provided. This is a key factor especially in terms of claims handling, as this area is the one that reflects the insurer's quality the most. The Czech insurance market succeeded easily in coping with floods causing over one hundred claims within two weeks.

The area that requires our constant attention is sales. It is not simple to explain to our customers the scope of the products in an understandable way. Insurance is indeed a quite complex discipline and rather unattractive one for normal people, however, the less replaceable in our daily lives. Cultivation of sales, education and training of consultants as well as legislation are issues intensively tackled by the Czech market, lawmakers and our regulator (Czech National Bank).

XPRIMM: Which are in your view the most "promissing" business lines in your market and how is your company intending to take advantage of the opportunities offered by these lines?
M.D.:
Our classic insurance types are more or less on the level of developed countries, nevertheless, there are areas where the Czech Republic has a great potential. For example the private health insurance that works in our southern neighbours, but not here. From the visits of VIG headquarters and numerous discussions with my colleagues in the Group, I know that one third of Austrian population has a private health insurance, which covers the daily benefit during hospitalisation, costs of a doctor, room with better facilities for in-patients, a wider choice, etc. This is an amount of money that could be invested in the Czech health care system too. However, if or when this will be the case, is a rather political question. Should there be a change in legislation, we are ready - also thanks to the VIG environment - to play a key role on such market.

XPRIMM: The motor insurance segment was affected, in the entire CEE region, by a highly competitive environment leading to an aggressive price war and a scarce profitability of the segment. Which is the current situation in your market in this respect? How does your company cope with the motor insurance market's challenges?
M.D.:
In the Czech Republic, the motor insurance segment has been developing intensively. After 5 years of decreasing MTPL premium (in total by 25% under constant growth of insured vehicles, growing prices of spare parts and property and health damages), the trend finally reversed and the premium recorded a year-on-year growth by almost one billion CZK. This may be a positive sign in the future; however, this growth cannot cover even the costs and new payables based on the new Civil Code, the contribution to the Loss Prevention Fund and to fire fighters. This is the cause for this segment making basically loss, despite the market seeking compensation of this unacceptable situation. We are facing an extremely fierce competition and hence too low MTPL premium, i.e. a similar situation recoded in Germany from 1995 to 1999. The premium had been decreasing for 5 years which then resulted in an immense loss suffered in this line of business, price hike as well as some insurers leaving the market. It appears that we have mastered the situation without such dramatic consequences and the prices have been rectified since last years.

XPRIMM: Property insurance has still a low penetration across the CEE region, although the frequency and intensity of the weather related events are significantly increasing. Please comment on the current situation in your market.
M.D.:
It may seem that each cautious owner of a house, apartment or household has contracted an insurance policy. Surprisingly, this is the case neither in our country nor in adjacent CEE countries. According to statistics, one in two households and one in three houses are uninsured. There is still a significant potential in this segment on the Czech market. If compared to Germany or Austria, it is surprising how many houses or apartments are not covered. On the other hand, Kooperativa has traditionally held a strong position in personal property insurance mainly thanks to the cutting edge products and high quality service provided. Our portfolio has been growing for the last 20 years and has one million policies presently. And we have been growing in spite of rising quality and strength of our competitors.

XPRIMM: How do you assess the 2015 perspectives? What are the strategic development targets for your company in the next years?
M.D.:
I do not expect any significant changes on the market this year. Legislation, both Czech and European, and the regulator's approach will play the key role. From the macroeconomic prospective, some signs point to a certain recovery, which will boost the interest in insurance. Nevertheless, our strategy remains the same: Vienna Insurance Group CR seeks to be the biggest and mainly the first-rate insurer of the Czechs, households and companies. I believe that we have succeeded in meeting this strategy so far and I hope that we will be able to do so also in the future. What I see as our greatest advantage is both that we are making a high-quality insurance and mainly that we want to make it in long term. We are very much aware that insurance business is a long term affair as we contract insurance policies lasting sometimes over 30 years. And clients apparently know to appreciate it.

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