Insurance Market In Poland 2009-2011, CEE Insurance Series

Intelace Research
June 1, 2009
89 Pages - SKU: INTL2275737
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Countries covered: Poland

Market growth

During most of 2008 the insurance sector in Poland experienced solid premium growth. Non-life insurance segment benefited from increasing car insurance market, relatively stable property prices and strong spending of corporate sector, recording a premium growth of 12.8% yoy*.

Performance of life segment was also much better than anticipated. Premium written surged by impressive 52.8% yoy*. This was, however, largely attributable to exploding sales of bancassurance products: deposit-like, tax shield policies. It can be estimated that the total life premium linked to other products than deposits in fact fell in value and the reason was primarily dramatically low sales of unit-linked insurance, diving by almost 50% yoy*. In regional comparison, Poland has strengthened its position as a leading insurance market in CEE14** with ~46% share in total premium within the region.

Competition & concentration.

During 2008 the dominant player - PZU continued to loose market share in non-life business (particularly in motor insurance). The winners were aggressive mid-size and smaller players: Ergo, Allianz and other. Non-life market became extremely competitive since more and more players introduced direct sales models and engaged in price war. In contrary, within life insurance segment, big changes took place at the top of league table. Players focusing on unit-linked products have been severely hit by disappearing demand for their products and as result their position fell dramatically (e.g. Aegon fell from #3 in 2007 to # 12 in 2008). On the other hand the major life player - PZU oycie was able to reinforce its position for the first time since many years. This was a result of massive sales of deposit-like policies, which is apparently not sustainable.

Profitability

During 2008 technical accounts of most insurers have deteriorated, being hit by increasing claims, unfavorable regulatory changes (Religa tax) and lower investment results. In non-life segment, the combined profit of insurers fell down by almost 50% vs. 2007, being affected mostly by rising claims and higher acquisition costs. In life business insurers managed to grow profits by 14% in 2008, however, their technical results and returns on investment were weaker than a year ago. Large production of new premium in form of deposit-like tax shield policies (called also an "empty premium” did not pay-off in profits since those products offer only tiny margins, while require insurer’s capital.

Sales channels

Expansion of aggressive direct players and increased price competition initiated a structural shift in insurance sales channels with growing importance of direct and online sales. The role of banks increased again, especially in life business where almost 46% of total premium was written together with banks. Apart of bank-counter sales , banks are increasingly investing in online sales/comparison platforms offering motor, property, travel and property insurance (mBank, iPKO). On the other hand insurance tariffs are also becoming more transparent for clients thanks to more and more popular online comparison websites (e.g. iPolisa)

Future outlook

Slowing economy, worsening situation of enterprises and more cautious consumers are factors not particularly favorable for insurers.

However, according to most experts, the Polish economy will be still able to avoid recession in 2009 and will rebound in 2010, which translates into moderately positive mid-term outlook for insurance companies. In 2009 premium written in non-life segment is expected to stagnate, while life premium may slightly fall, due to lower sales of tax friendly "deposit-like” insurance products. It is likely that both life and non-life markets will resume growth already in 2010. Life market is likely to benefit form better performance of stock markets (come back of unit-linked products) while non life market may gain from increased consumer spending for cars, real estate etc. and attract more premium from corporate sector.

Finally, the expected public health system reform and possible introduction of tax breaks for private medical/health insurance creates a big upside potential in non-life segment.


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