Nikola RODIC, Head of Actuarial and Statistic Division, Insurance Supervision Department, National Bank of Serbia
Nikola RODIC: Based on the preliminary data for 2014, Serbian insurance market continued exhibiting similar trends identified in the previous period. Premium growth was driven by developments in the life segment, which recorded a double digit growth rate of 13.8%. Non-life premium recorded a more modest growth rate of 6.9%, mainly thanks to a significant increase of the MTPL premium. Balance sheet total also recorded an increase, with technical provisions reaching almost one billion euro thanks to a robust growth rate of 21.6% y-o-y. Overall stability of the insurance market was preserved, while insurance companies continue to face cost pressures in their operations.
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?
N. R.: Growing diversity of consumer needs pushes insurance companies to develop more and more diverse and complex products. Information asymmetry and selling practices influence the overall picture of the insurance market and put issues of consumer satisfaction and consumer protection into the spotlight. Having in mind the identified issues regarding consumer protection, as well as the trends in the EU, the new Insurance Law proposed by the National bank of Serbia, introduced additional requirements regarding information for policyholders. Insurance companies are required to provide policyholders with the minimal prescribed information before concluding the contract, as well as during the term of the contract, with additional requirements regarding life insurance. Requirements, which are aligned with the aquis, should provide policyholders in Serbia similar level of protection as in the member states of the EU.
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?
N. R.: MTPL is still the dominant segment of the Serbian insurance market, accounting for 32.7% of total premium in 2014 and with more than 2 million policyholders. Premium increase in this segment had a major impact on the whole non-life portfolio, especially having in mind subdued growth recorded by other non-life lines which are not compulsory. Significant increase in the insured sum for MTPL based on implementation of new regulation in the second half of 2014 is expected to further improve the level of protection of injured third parties, and enhance it significantly.
XPRIMM: The ever decreasing new car sales in the crisis and post-crisis years negatively impacted on the motor hull class evolution. How do you comment on this aspect?
N. R.: Effects of the crisis have been hard felt in the motor hull segment of the insurance market in Serbia, exhibiting prolonged consequences. Motor hull insurance has been struggling for years, contracting to a share of 8.7% of total premium in 2014. Number of insured vehicles has even decreased to little over two hundred thousand last year together with shrinking premium volume. Challenging environment has induced insurance companies to find different strategies to compete in this segment, with varying success, but motor hull insurance still remains an important segment of the market attracting a number of companies.
XPRIMM: Property insurance - especially in what the dwelling insurance and agricultural insurance are concerned - 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.
N. R.: Property insurances are the second most important segment of the Serbian non-life insurance market. They accounted for more than a fifth of total premium in 2014. Property insurances have recorded modest growth rates for years, and this tendency continued in 2014 with property insurance premium having a growth rate of 2.2% y-o-y. Importance of property insurances was highlighted in Serbia thanks to the effects of devastating May floods. Estimated total economic losses of these floods came to staggering 1.5 billion euro, which represents 4.5% of Serbia's GDP. Low penetration of insurance was evident in the amount of insured losses that were less than 40 million euro. Majority of insured losses were recorded in the property lines, with reinsurance covering significant part of the losses.
XPRIMM: How do you assess the 2015 perspectives? Do you expect some significant changes in the market / legislation etc.?
N. R.: Insurance market is influenced to a high degree with the developments in the real economy. Relatively high unemployment rate and a slowdown of GDP growth since the start of the financial crisis have had a prolonged impact on the insurance market, and improvement in macroeconomic environment, thanks to the economic consolidation started by the government, would be beneficial to the insurance market in the medium term.
Important legislative changes for the insurance market in Serbia occurred in December of 2014. Serbian Parliament adopted the new Insurance Law proposed by the National bank of Serbia. Regulatory changes align the insurance framework with EU directives to a significant degree and increase the level of protection of policyholders. National bank of Serbia is working on a number of bylaws for the full implementation of the new framework, and alignment of the Serbian insurance market with the new requirements, bringing it much closer to EU rules is expected to be completed by the end of 2015.