THE IMPACT of the current economic downturn on insurance has had two facets. While corporate clients have bought less insurance as their businesses have declined, the crisis has generated more interest from private individuals, who are looking for more opportunities to invest their money.
The Slovak Spectator spoke to Peter Císar, head of the Slovak branch office of QBE Insurance (Europe) Limited, and Judita Smatanová, spokesperson for Union Poisťovňa, about the effects of the crisis on their companies and the challenges they face.
The Slovak Spectator (TSS): How has the current economic decline affected your insurance company?
Peter Císar (PC): Our company is trying to respond to the changed economic environment with a consistent analysis of processes. During the recent period we have changed the organisational structure in order to respond much more flexibly to changes in individual areas of the economy. As a non-life insurance company, we provide products to industrial companies, business entities, but also ordinary consumers. As the crisis has hit various areas of the economy over various periods of time, so the economy will revive in phases. Thus a selective approach will be the key to success.
Judita Smatanová (JS): Union insurance company has adopted many measures to reduce costs and increase effectiveness in personnel, marketing, IT and other areas.
TSS: Has your company adopted any measures to improve the internal processes or effectiveness of your company?
PC: We have implemented a new organisational structure with distinct responsibility [placed with] the product leader for results in his or her portfolio. We have reduced the number of employees and re-divided individual tasks. We are monitoring costs and looking for more effective solutions. We are trying to use the crisis to hedge prices of services for a longer period of time, where they might be expected to increase.
TSS: Which are the biggest potential risks in the insurance segment during the current period? What are the challenges the Slovak insurance market faces?
PC: The biggest risk within insurance is especially the commercial model of the insurance companies. Responsible access to risk valuation, creation of adequate reserves and supervision of costs must be of key importance for every top manager of an insurance company. A senseless rush for market share without a stress on the above criteria creates an unhealthy environment in which rates decrease without any justification and the whole market is much more vulnerable.
JS: From the viewpoint of insurance companies, the assets and liabilities of companies and insurance of motor vehicles represent the biggest insurance risks.
With regards to the challenges, the new law on financial mediation will bring changes in consumer protection.
TSS: Has the financial and economic crisis brought any positives to the Slovak insurance market or to your company?
PC: The crisis has also influenced the market in a positive way. The S&P A+ rating, which QBE Insurance has, today plays an important role in decision-making processes when industrial companies ponder where they will place their risk. New commercial opportunities have opened in front of us. For long-term risks, especially for liability insurance, the credibility of an insurance company is of absolutely key importance. Some insurance companies, as a consequence of the economic crisis, have been forced to re-evaluate their prices, from which the market has benefited as well as our company.
JS: The main positive feature that the crisis has brought is in the insurance of citizens, who are now more interested in various forms of savings and want to better understand where their money is invested.
In the segment of insurance of companies, the situation has worsened somewhat owing to the crisis because companies’ activities have been reduced or their financial positions have worsened.