Ken research announced recent publication on, “Life Insurance in Hungary, Key Trends and Opportunities to 2020”. The report provides a detailed outlook by product category for the Hungarian life insurance segment, and a comparison of the Hungarian insurance industry with its regional counterparts. It provides key performance indicators such as written premium, incurred loss, commissions and expenses, total assets and total investment income during the review period (2011-2015) and forecast period (2015-2020). The report also analyses distribution channels operating in the segment, gives a comprehensive overview of the Hungarian economy and demographics, and provides detailed information on the competitive landscape in the country. The report brings together modeling and analysis expertise, giving insurers access to information on segment dynamics and competitive advantages, and profiles of insurers operating in the country. The report also includes details of insurance regulations, and recent changes in the regulatory structure.
In spite of Europe’s economic slowdown, the Hungarian insurance sector continues to strengthen as more and more of the population seek greater protection The Hungarian life insurance segment registered a review-period CAGR of -0.1%. Hungary’s life segment accounted for 51.0% of the industry’s gross written premium in 2015. Life insurance categories such as individual whole life and term life insurance recorded growth, at a review-period CAGRs of 3.9% and 4.8%, respectively. The Insurance Companies and Insurance Activities Act was introduced in December 2014, and came into force on January 1, 2016. The Hungarian life segment is highly concentrated, with the 10 leading insurers accounting for 85.8% of the segment’s gross written premium in 2015.
During the financial crisis, Hungary’s insurance sector proved itself to be crisis-resistant. In another sign of its robustness, the market has shown impressive annual growth over the last three years: according to the Hungarian Insurers’ Association, in 2015 the number of total written premiums had increased by 2.2 percent in a non-inflationary environment. Non-life insurance written premiums were the strongest basis of this growth, having increased. In parallel, written premiums of life insurance had decreased, which can be explained by decline in single premium insurance, while the regular premium life insurance portfolio could still increase after a considerable period. Therefore, the adjusted written premium of the life insurance branch increased. Nonetheless, average insurance premiums are still far below the premium level of neighbouring countries. Growth in regular life insurance premiums clearly resulted from pension insurances that are supported by state tax allowance, which saw the number of contracts exceed 135,000 last year alone. Therefore, although the market continues to show signs of stability, there is scope for considerable growth. In terms of gross written premium, the Hungarian insurance industry is the third largest in the Central and Eastern European (CEE) region after Poland and the Czech Republic.
CHANGE OF LEGISLATION IN INSURANCE SECTOR & IMPACT
The national market has been preparing intensively for the transposition of EU regulations, the ever-changing conditions of Solvency II and the implementation of the IDD and PRIIPS rules. As a company, we have taken further steps forward as well. The cooperation developed under the aegis of the Association of the Hungarian Insurance Companies between the profession’s stakeholders and the Hungarian National Bank performing its supervisory role is a pioneering initiative. Following negotiations, the Insurance Act has been amended in several stages: as of this year, the act now centrally regulates the minimum levels of investment and surrender values while limiting the commission rate payable for life insurance. To further strengthen insurance rules, it has also become mandatory to involve depositaries, and from next January, only those units that have been invested by the insurance company may be shown. Since 2014, the Hungarian National Bank has regulated the TER level of pension insurances. In order to widen the scope, earlier this year the regulation ensuring cost transparency was extended to all life insurance policies.
POTENTIAL WITHIN INSURANCE SECTOR
It is clear that life, pension and health insurance provide the best potential. Numerous studies show an increasing number of Hungarians are aware that old-age benefits cannot be financed solely from a state pension. According to a recent study by the Hungarian National Bank, the stability of the current pension system is ensured until 2030, meaning our ageing society will be confronted with increasingly substantial challenges in the subsequent years. In fact, people are already facing problems with the healthcare system. In this respect, the mission of insurance companies is not scare mongering, but setting forth a realistic alternative. Our domestic economy has established an appropriate basis in recent years; as households and companies have started to regenerate assets, their demand for insuring these assets is increasing. Moreover, the number of people who take out travel insurance when going on vacation is continuously increasing year after year. As the economy improves, the number of people travelling abroad increases as well. Consumer propensity to save has also taken a positive turn; the importance of self-provision is recognised more and more by the Hungarian population.
CHALLENGES FACED BY THE SECTOR
One of the sector’s key tasks is to create and continuously build trust. Exploration and improper information is the biggest issue for the sector. This is a problem because many of them might have the wrong idea about a product they have bought, which may remain misunderstood for years. For this reason, insurance companies have a great responsibility in clearly communicating with the client both during and after a sale. Hungarian insurance sector and regulators of the Hungarian legal environment have developed cutting-edge solutions in this field. However, there is plenty more to be done in order to make it clear that different types of insurance have positive utilities at both micro and macro levels.
Although a low interest rate environment presents another challenge to insurance companies, it is also an important advantage, as insurance coverage may provide valuable help over such timeframes where the accumulated return on investment would not resolve the problem encountered in the given life situation. Besides, we have to overcome an important innovation challenge: insurance cannot be distributed to members of Generations Y and Z by traditional methods anymore. It is therefore crucial to rethink our products, services and sales solutions, and take advantage of digitalisation.
INNOVATION AND FUTURE
Innovation plays an increasingly important role in our customer service. We have made a major leap forward in our technology, having introduced a new customer service IT system that gives us the opportunity to make numerous developments in the future. It is fantastic for managing outgoing campaigns and, thanks to the knowledge-based call distribution, it directs the call to the most competent administrator for any given product, thereby shortening the administration process on both sides. As our customer, service staff may receive requests regarding more than 30 different products or product modalities, these solutions ensure a smoother workflow. In a move towards greater efficiency, our online sales system at post offices has become redundant, and it is now accessible through our integrated postal network at an even higher bandwidth than before. Besides developing our sales system and rationalising our mailing process, several back office processes were optimised last year. We now include an intelligent barcode on each insurance proposal and document; this means all documents received and converted into an electronic document are catalogued automatically. The 14 years of cooperation and a joint commitment with the Hungarian Post for continuous innovation brings us success year after year. It endeavours to add as many term life insurances to our product line as possible, as demand for self-provision and insuring owned assets is continuously increasing in Hungary’s improving economic environment.
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Ankur Gupta, Head Marketing & Communications