JULY 07 2011 Tomas SINICKI Nexum INsurance technologies 2nd International Insurance Forum Azerbaijan Insurers Association EXCITING TIMES NEW MTPL ERA NEW MTPL ERA Key novelties New law aimed at increasing awareness of importance of insurance through stricter adoption of compulsory insuranc ID: 778201
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Slide1
Slide2A BRIGHT LOOK AT THE PRESENT AND WHAT THE FUTURE HOLDS
JULY 07, 2011Tomas SINICKI, Nexum INsurance technologies
2nd International Insurance Forum
Azerbaijan Insurers Association
Slide3EXCITING TIMES
NEW MTPL ERA
Slide4NEW MTPL ERA
Key novelties
New law aimed at increasing awareness of importance of insurance through stricter adoption of compulsory insurance
Compulsory insurance Bureau organization
Implementation of regulations related to compulsory insurance
Market facilitator (
not
regulator)
Common MTPL database
Exchange of information among stakeholders
Fraud prevention/detection
Slide5NEW MTPL ERA
Great expectations
Greater penetration => increase in the number of insureds
Greater insurance awareness => boost in sales of voluntary insurance products
Greater premium
Greater claims
Slide6NEW MTPL ERA
Example: acceleration of Russian MTPL market
Compulsory
MTPL in Russia since 2003
People
perceiving CMTPL as a State imposed tax dropped from 40% in 2005 to 30.4% in 2006
CMTPL was a catalyst, which significantly raised insurance awareness of population and encouraged purchasing other types of insurance
Source: Rogozin, 2006
Slide7NEW MTPL ERA
Example: acceleration of Lithuanian non-life insurance market
Number of non-life policies nearly doubled (95.4%)
Premium went
up substantially (65.2%)
Claims were quick to catch up (63.8%)
Source: Lithuanian Insurance Supervision Authority
Slide8NEW MTPL ERA
Example: acceleration
of the Lithuanian MTPL market
(key events)
Slide9NEW MTPL ERA
Example: acceleration of Lithuanian non-life insurance (second jump)
Second wave of growth after joining EU
More focus
on cost control
Loss ratio remains stable
Combined ratio goes down due to decreasing cost ratio
Source: Lithuanian Insurance Supervision Authority
Slide10NEW MTPL ERA
Implications for business acquisition management
Balancing portfolio away from dependence on Motor is very challenging in many markets
Example: in Poland Motor business acquisition costs have been growing steadily over the last decade
Source: Kwiecien & Poprawska, 2011
Slide11NEW MTPL ERA
Implications for operations management
Increase in the volume of business leads to greater administrative challenges
Keeping acceptably low MTPL loss ratio in the long run is extremely difficult
Cost control will become the most important management component
Expect greater focus on process efficiency
Increase in the number of claims leads to challenges on the client service side and concerns over efficiency improvement
Typically ignored at the outset of the industry; often recalled too late
Expect greater focus on process efficiency
Poor systems not only cost too much but also leave you without data useful for fraud detection
More investment in information technologies
Efficiency in business acquisition and claims handling will be pivotalAim at becoming less human intensive than your peers from the start
Slide12WHAT ELSE HAS WORKED FOR US
CHANNELS
Slide13BANCASSURANCE
Insurance market in the Baltic States benefitted enormously from bancassurance
Non-life insurance intermediation was seen by a bank as a profit center
First home/car purchases were financed by loans in 2001-2004
Adoption of compulsory MTPL law coincided with very loose credit policies by Scandinavian banks
Development of insurance market cannot be attributed solely to adoption of compulsory MTPL law
Cross/up-selling was much easier in times of prosperity
Conclusion
Vital channel, not only for life but also (increasingly) non-life insurance
Work on persuading banks to get involved early
Slide14ALTERNATIVE CHANNELS
Internet
In the Baltic, real take-off in 2007
Today, over 50% of MTPL policies are bought online
Mobassurance
Distribution of policies using mobile operators’ infrastructure and network
In the Baltic started in September 2010 in Estonia
A significant competitor to all major traditional distributors of insurance
Slide15SO WHAT
CONCLUSIONS
Slide16CONCLUSIONS
Based on experience in other markets, one can say that given appropriate legal circumstances, market acceleration can be very fast
We should expect gains but also prepare for investment in efficiency because pressure on managing costs will increase significantly
Balancing portfolio will be an important challenge and is sure to be forgotten
Getting banks involved early on may help balance portfolios with less effort than otherwise required
Slide17CONCLUSIONS
Putting alternative channels to use may come sooner than in most European markets and that would be beneficial to both consumers and insurers
In the long run, closer cooperation among market participants will create more discipline and help challenge fraud issues
Starting slightly later provides certain advantages; the key is using them properly
Slide18THANK YOU