Such a reading is also the most recent report of GENEVA Association (details on them, HERE), suggestively titled “Understanding and Addressing Global Insurance Protection Gaps”. Summarily, the material analyzes and seeks solutions for the so-called insurance protection gap. The phenomenon of under-insurance, on a global scale.

The report’s conclusions, presented in terms of demand – and, therefore, of clients -, show how:

• affordability remains a relevant obstacle for increased insurance penetration, primarily in developing and emerging insurance markets;
• this phenomenon overlaps a void of poor financial literacy or general education, even in developed countries, because the lack of product understanding is, following affordability, the second most relevant reason for not purchasing insurance.

At the same time:

• about half of insurance buyers base their final purchasing decisions on price;
• insurance demand is higher among households with higher levels of financial literacy;
• service and experiential factors, including clear communications, are among the most relevant drivers of insurance purchasing decisions and are almost as important as price and scope of coverage.

On the offer side – and, therefore, on industry and distribution side -, GENEVA Association states that:

• the cost of producing insurance cover is currently one of the most intensely debated industry topics, especially in the light of technological innovation – which can provide significant efficiency;
• in non-life insurance, for example, about 30 cents of each premium dollar are generally absorbed by distribution and general administrative expenses. This fact dents the “economic appeal of insurance”.

There are also solutions: all of them require a multi-stakeholder effort, including the area of public authorities. Along with this sector, which can do a lot to complement the industry’s efforts on financial education, employers have an important potential role to play in influencing employees’ financial behavior, by providing employees with ongoing financial education and training and by promoting and incentivizing healthy lifestyles. At the same time, social media and mobile tools of communication enable quantum leaps in public awareness of insurance and its main characteristics, even in countries with almost no existing traditional distribution channels. Therefore, hope dies last.

Back to Romania, the middle column of the chart above clearly shows who and what to do. It’s not us saying it, but one of the Planet’s biggest think-tanks. In conclusion, we don’t have to dig too deeply, to set our goals at the industry level. One question still remains: who will take a seemingly simple table – which is based on thousands of research hours, if not more -, and translate it into reality? And when?

P.S. The report, in its original form, can be downloaded from HERE!

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O asemenea lectura este si cel mai recent raport al Asociatiei de la GENEVA (detalii despre ei, AICI), sugestiv intitulat „Understanding and Addressing Global Insurance Protection Gaps”. Pe scurt, materialul analizeaza si cauta sa gaseasca solutii pentru asa-numitul insurance protection gap. Fenomenul subasigurarii, la scara globala.

Concluziile raportului, prezentate din perspectiva cererii, deci a clientilor, arata cum:

• puterea de cumparare ramane principalul obstacol pentru cresterea penetrarii asigurarilor, mai ales in economiile in dezvoltare sau emergente;
• acest fenomen se suprapune unui vid in educatia financiara, prezent chiar si in tarile dezvoltate, caci lipsa de intelegere a produselor este cel de-al doilea motiv pentru care oamenii nu incheie asigurari, dupa faptul ca nu si le permit.

In acelasi timp:

• jumatate din consumatori iau decizii legate de asigurare in functie de pret;
• cererea de produse de asigurare este mai mare in gospodariile unde educatia financiara depaseste media;
• calitatea serviciilor oferite clientilor si a experientei oferite, inclusiv a comunicarii cu acestia, sunt printre cei mai relevanti factori ce determina incheierea unei polite. Acesti factori concureaza cu pretul si acoperirea oferita.

Din perspectiva ofertei, deci a industriei si distributiei, Asociatia de la GENEVA spune ca:

• costurile la care sunt preluate in asigurare riscurile reprezinta un subiect extrem de dezbatut, mai ales in contextul inovatiei tehnologice – ce poate oferi o eficientizare importanta;
• in asigurarile non-viata, 30 centi din fiecare dolar platit ca prima de asigurare sunt absorbiti de costuri administrative si de distributie. Acest fapt este de natura a afecta „atractivitatea economica a asigurarilor”.

Exista, insa, si solutii: toate, insa, presupun o implicare colectiva a mai multor stakeholderi, inclusiv zona de autoritati publice. Alaturi de acest sector, care poate face extrem de multe completand efortul industriei pe partea de educatie financiara, angajatorii sunt cei care pot influenta comportamentul financiar al angajatilor, oferindu-le acces la programe de educatie financiara continua, promovand luarea de decizii informate si un stil de viata sanatos. In acelasi timp, spune raportul, social media si device-urile mobile ofera posibilitatea unei dezvoltari incredibile a notorietatii asigurarilor si a caracteristicilor de baza ale acestora, chiar si in tari unde canalele traditionale de distributie sunt aproape inexistente. Deci, speranta moare ultima.

Intorcandu-ne la Romania, coloana din mijloc a graficului de mai sus arata clar cine si ce are de facut. Nu o spunem noi, ci unul dintre cele mai mari think tank-uri de pe Planeta. In concluzie, nu trebuie sapat prea adanc pentru a ne seta obiective la nivel de industrie. Ramane, insa, o singura intrebare: cine, oare, va lua un aparent simplu tabel – ce are in spate mii de ore de cercetare, daca nu mai mult – si il va transpune in realitate? Si cand?

P.S.: Raportul, in original, poate fi descarcat de AICI!

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Hannah GRANT: The Access to Insurance Initiative (A2ii) is the implementation partner of the IAIS for financial inclusion: While the IAIS determines the necessary standards and structures for good supervision, it is our role to listen to and work closely with insurance supervisors and provide guidance on how to implement those standards. A2ii’s close relationship with insurance supervisors and the IAIS enables us to better identify areas where support is needed and to feed what we learn on the ground back into the IAIS’s standard setting process.

The A2ii was created in 2009, as a unique global partnership working with development agencies, insurance supervisors, international insurance bodies and local entities, with the mission to inspire and support insurance supervisors to promote inclusive and responsible insurance. We work closely with our partners, leveraging off their comparative strengths. For example, we have recently signed a partnership agreement with the IAIS and the International Actuarial Association, under which we will work on a joint actuarial capacity building programme for insurance supervisors. Partnering with the IAA will allow us to draw on the collective subject matter expertise from the global actuarial profession for this important initiative.

To provide you with an overview of what areas the A2ii works on: we generate and disseminate knowledge, build capacity, contribute to IAIS standard setting, promote learning & dialogues, support regional & country implementation and get involved in global advocacy processes. One key activity, for example, in terms of capacity building for insurance supervisors is the Inclusive Insurance Training Programme for Insurance Supervisors, that we organise together with the Toronto Center. One of these training events is planned to take place in CEE, at the end of 2018.

The concepts of microinsurance and inclusive insurance are receiving more and more attention in the region. But there is a need of clarity in what these concepts are concerned. Could you, please, comment on that?

H.G.: Microinsurance, as defined in the 2007 IAIS Issues Paper on the Regulation and Supervision of Microinsurance, is insurance that is accessed by the low-income population, provided by a variety of different entities and run in accordance with generally accepted insurance practices. This means that the risk insured under a microinsurance policy is managed based on insurance principles and funded by premiums. Microinsurance covers a broad variety of products – for example, life insurance, funeral cover, health, invalidity, livestock, crop and asset insurance.

Inclusive insurance is a broader term denoting all insurance products aimed at the excluded or underserved market, rather than just those aimed at the poor or a narrow conception of the low-income market. This definition can be found in the IAIS Conduct of Business in Inclusive Insurance Issues Paper published in 2015.

Why is it that regulators everywhere seem to need support in what capacity building for inclusive insurance is concerned?

H.G.: Inclusive insurance markets have grown tremendously over the last one or two decades. By definition, inclusive insurance is addressing people or risks that have been formerly excluded or insufficiently covered by traditional insurance markets. This means that all stakeholders in the inclusive insurance sphere are continuously confronted with new market participants, new products and new risks that require new or adapted supervisory solutions. Especially in the wake of InsurTech, inclusive insurance providers and supervisors alike find themselves in a rapidly changing environment, with a lot of innovation taking place. Supervisors need to carefully balance the promotion of market development by supporting innovation, while at the same time considering new consumer protection challenges and also systemic risks that are associated with these innovations, especially when they reach scale. But even before the rise of technological innovation in insurance, distribution in inclusive insurance markets was always characterized by innovative approaches and new stakeholders in the insurance value chain. Take for example the so-called mass insurance products in Latin America using supermarket chains as agents or self-help groups in India that started providing, e.g., health insurance cover to their members.

One of the key instruments that A2ii uses to tackle the challenge of this high pace of change is peer exchange: Supervisors are keen to learn how others have dealt with the challenges they are facing as well and what their experiences have been. This is at the heart of what A2ii is doing. For example, we organise bimonthly supervisor only WebEx calls (“Consultation Calls”) to provide supervisors with an opportunity to learn about a specific topic from an expert, hear how other supervisors have dealt with the issue and discuss. In the last call on March 22, we had 82 supervisors from 30 countries exchanging experience on “Innovation hubs and accelerators”.

I had the honour of joining you as speakers at one of the first Inclusive Insurance-dedicated events in the CEE, taking place in Slovenia. One of the major discussion topics revolved around the regulatory challenges that building such schemes in the EU would face. How would such schemes survive Solvency II, the IDD, GDPR etc.?

H.G.: The key principle underlying the implementation of inclusion-friendly regulatory regimes is proportionality. The IAIS guidance is very clear in that the same rules apply to inclusive as to traditional insurance, but in a manner that is proportionate to the nature, scale and complexity of the risk involved. In that sense, there is no contradiction of implementing inclusive insurance schemes under Solvency II. On the contrary, a supervisory regime that focusses on risk actually provides a good basis for a supportive inclusive insurance environment.

That said, I think the real challenge presented by these schemes, to a more inclusive friendly approach, is the prioritisation of resources to ensure compliance with them. As a result, supervisors, as well as the industry, will likely have less resources available to dedicate to the development of a more inclusive regulatory and supervisory environment and serving the underserved.

Data protection is an equally important issue in inclusive insurance as it is for other insurances because of the rapid advances in InsurTech businesses. Therefore, improvements in data protection regimes across the CEE are also important for ensuring inclusive insurance consumers are protected against some of the new risks emerging because of these technologies.

What types of micro or inclusive insurance products would most likely be suitable for developing economies of the CEE region, in your opinion? How do you see the future in this regard?

H.G.: Insurance penetration rates are very low across the CEE. According to SWISS Re, the total insurance penetration rate (life and non-life) stands at 1.9% in 2016 in CEE, in comparison to 7.5% across the rest of Europe. This is similar to the penetration rates seen in many countries in Africa – 2.8% in 2016 -, therefore the growth of all types of insurance products would be, I think, of huge benefit to the CEE region.

Accident and (credit) life remain the most common microinsurance products available globally and I believe greater availability and uptake of these products would also benefit the CEE region. Credit life, whereby the life insurance product, is required as a form of guarantee for someone to get access to a loan, if well designed can provide valuable protection to low income individuals, whilst at the same time enables greater access to credit essential for entrepreneurial activity.

Of a particular interest for the CEE region are index based insurance products. There are products designed to trigger once a pre-determined threshold is hit, such as a certain rainfall level. The agricultural dependency of the CEE region, together with its catastrophe exposure, mean that these types of products could potentially provide small holder farmers with much needed protection against extreme weather-related events, enabling them to quickly pick themselves up without needing to sell productive assets. Although index based insurance products have been available on the market for a while now, technological innovations are helping to improve the accuracy of the indexes reducing basis risk (risk of someone suffering a loss, but index not been triggered or index being triggered although loss has not been experienced), as well as substantially reduce the distribution and servicing costs of getting the products to the consumers. This is helping to bring down the cost and improve the quality of the products and, thus, increase their attractiveness and appropriateness for low income consumers. That said, more time is still required before it is really known whether basis rate related concerns can really be adequately addressed to make index based products an appropriate solution for low income individuals.

Why is it so important to promote the concept of “bridging the protection gap” from a societal point of view?

H.G.: There are different aspects to this question: first of all, insurance is an important building block of inclusive financial services that aim at contributing to poverty reduction. When loss strikes, it does not discriminate between the rich and the poor. Past development efforts might be reversed in the event of a shock and the near-poor may fall (back) into poverty.

On a macroeconomic level, a robust and developing insurance industry is widely understood to be an essential ingredient for economic growth and stability in developing economies. By mitigating the adverse effects of potential losses for individuals and businesses, insurance promotes trade, commerce, access to finance, effective risk management and entrepreneurial activities that might otherwise be perceived as too risky. Effective insurance regulation and supervisory systems with policyholder protection mechanisms in place and appropriate incentives for industry involvement are fundamental to the establishment, growth and maintenance of a robust insurance industry.

A2ii has been doing work in the area of InsurTech and its connection to inclusive insurance. What is the role that technology plays and how do you see the future from this point of view?

H.G.: InsurTech heralds the advent of the Fourth Industrial Revolution. The speed of change has no historical precedent. When compared to previous industrial revolutions, change is occurring at an exponential, rather than linear pace. When it comes to greater access to insurance, these are exciting and unprecedented times. Market dynamics are shifting, but most importantly, new customer behaviour and expectations are emerging. InsurTech holds a vast potential for improvements in insurance product design, the development of better-tailored products and reducing administrative costs. These efficiency gains can lead to lower premiums, better client servicing and faster payouts.

However, with change comes the challenge of leveraging technology to serve the customer and create new customer engagement models. The potential value of meeting the customers’ needs also brings new risks. One such risk comes with the issue of data protection and the questions of data and public intelligence ownership. Another one comes with the usage of big data and subsequently pricing out low-income consumers due to segmentation. To mitigate them, supervisors must monitor and understand the market, and, above all, be open to innovation. More clarity in this regard is paramount.

The A2ii is working hard to support supervisors in responding to these challenges they face. A series of three events in 2018 in Africa, Asia and Latin America, for example, focuses on questions around InsurTech and inclusive insurance. These “Consultative Forums”, organized by the A2ii, together with the IAIS and the Microinsurance Network, provide a platform for promoting dialogue between supervisors and the insurance industry on a specific question. Also, our last WebEx Consultation Call on Innovation hubs and accelerators took a closer look at inter-institutional cooperation as a tool for responding to new market trends and for creating a safe space for the launch of new initiatives.

Inclusive insurance products are often seen as useful tools in economic development. Can you, please, offer us some successful examples in this respect?

H.G.: In OECD countries, it is estimated that a 1% increase in life insurance premiums raises real GDP by 0.06% per year (as, for example, referenced by the ILO’s impact insurance facility). Other studies, such as by the MicroInsurance Centre’s Microinsurance Learning and Knowledge (MILK), reveal the critical importance of insurance for low-income people as a tool for regenerating income in the face of calamity. For instance, in Colombia, 66% of claim payouts were used to repay debt, hence preserving access to credit for future business development. In Indonesia, a credit life insurance product – Payung Keluarga -, is greatly benefiting vulnerable communities by easing the economic burden caused by death, by reducing household debt through loan forgiveness and cash-payouts. Access to innovative insurance products is also opening up loaning opportunities and encouraging investment. In particular, credit-linked insurance is gaining traction among farmers in developing economies. In Kenya, for instance, a crop insurance product – Kilimo Salama -, is sold directly to farmers on credit basis to insure their crops against extreme weather events. Academic research has shown that farmers who purchased weather index-insurance increased their expenditure and invested more in agricultural inputs.

What future lies ahead for classical insurance when the basic model is being challenged by both inclusive insurance, peer2peer schemes and technolgical disruptors?

H.G.: We would not describe inclusive insurance as a challenge to classical insurance per se. The ambition to include new people in the market or to cover new risks is often a driver for innovation, especially in terms of distribution and the use of new technologies. We see insurance markets are becoming more responsive and innovative. However, it should always be guaranteed that innovation and change is to the benefit of the policyholders. It is, therefore, important that supervisors are able to understand the fast developments that are taking place and make them work for (inclusive) insurance. A2ii contributes to that by supporting supervisory capacity building and serves as a knowledge hub in key areas of inclusive insurance regulation.

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Believe it or not, this message needs to be reiterated at local, regional and global levels. ICMIF’s role, in a nutshell, is to remind policymakers, regulators and supervisors worldwide that mutual and cooperative insurers matter when it comes to protecting economies and societies and that they should be consulted the same way as proprietary insurers.

In the debate on how to stimulate growth at a macroeconomic level, ICMIF points to the cooperative/mutual model’s ability to drive growth and thus participate in the reshaping of a more sustainable (and equitable) global economy. In fact, our latest figures show the mutual insurance sector is the fastest-growing part of the global insurance industry since the onset of the global financial crisis and has almost 30% of the market.

The trend is encouraging, though we should not lose sight of the fact that a considerable amount of mutual and cooperative insurers are small and medium sized. To global regulators and supervisors, we therefore advocate a cautious regulatory approach that refrains from generating additional risk or causing the financial system to jeopardise its current pluralistic ownership or penalise existing business models. There should be particular regard for the national/regional, small and medium sized, and mutual or cooperative, operators, which cater to their policyholders/members’ needs and invest part of their surplus in the communities.

Mutuals and cooperative insurers are traditional players in some countries while in other emerging markets the concept is yet to be developed. Could you please highlight some of the advantages that this type of organisation brings? Where are most of your members located?
C.H.: You’ve raised an interesting aspect: cooperative/mutual insurers don’t exist everywhere – even in Europe they can be prevalent in some countries but in others are non-existent because they are not allowed. Firstly, it’s important to consider the role of political and cultural preferences, regulatory intervention and historical contingency. In Europe, for instance, many mutuals were set up by farmers or by professionals (from all walks of life), and others came out of social movements and contributed to the development of social protection. Many were formed by a group of individuals but some by political leaders, like the Emperor Franz Joseph I of Austria. The European mutual and cooperative insurance association AMICE has compiled the stories of a more than 30 of its member companies, which makes for very interesting reading. On the other hand, ICMIF’s global ranking of the 500 largest mutual and cooperative insurers shows an average age of 93 years, with some having been around for over 200 years. In terms of legal structure, the majority of the older companies are “mutual” insurers. In comparison, cooperative and non-profit insurers are a relatively newer model of insurance business. Takaful insurance is by far the youngest form of insurance: the five Takaful insurers featured in the Global 500 have an average age of just 22 years.

There is also a clear divide between developed and emerging markets when it comes to the market share of cooperative/mutual insurers. One third of our 290 members in 72 countries are based in the emerging world. Whilst the average market share of cooperative/mutual insurers in developed countries around the world is 31%, it is only 4 % in developing markets. In fact, countries without a mutual insurance-enabling law are low-income, highly populated countries.

This situation is lamentable given that the mutual model brings a competitive and attractive alternative to the mainstream, shareholding model; the mutual model focuses more strongly on stakeholder participation, evoking the early days of individuals getting together to mutualise the cost of protection.

In terms of regulation, are there any barriers to the development of the mutual business? If yes, we are interested in finding out the rationale behind this.
C.H.: As mentioned before, there are countries, even in the EU, where the insurance law does not provide for the creation of mutual insurance companies; this undoubtedly constitutes a barrier to entry and as such, it was picked up by the OECD trade department in its first Service Trade Restrictiveness Index (STRI) for financial services, which was released in 2014.

There is not a single explanation, for each situation is unique. In some cases, it could be a lack of information or misinformation on insurance or previous bad experiences with similar insurance carriers or products. In cases where the provisions relating to mutuals are excluded during the revision of the Insurance Act, we are still doubtful whether this indicates a concrete decision by the Government that the sector does not need to be regulated because of its smaller size. Be that as it may, we have observed that this regulatory vacuum may prompt players to devise their own models that carry one or more specific features of a mutual. This represents both an opportunity and a challenge which in some emerging countries is taken on by some motivated actors.

How would you comment on the difference between the mutual business model and the Peer to Peer model?
C.H.: There are certain commonalities between the mutual insurance and Peer to Peer insurance schemes, at least the ones who communicate about their business model. Swiss Re’s Sigma report on mutuals proposes a good classification of existing schemes and describes the similarities, including policyholders’ /members’ rights and their stake in any surplus. A difference, at least for the time being, is that most P2P schemes are merely intermediaries, not risk carriers, which rely on traditional insurers or reinsurers for capital. But most importantly, unlike mutuals, P2P platforms are usually privately owned and financed by venture risk capital.

Are mutual / co-operative insurers prepared for the future, from the digitalisation point of view?
C.H.: They are indeed prepared, but always on the basis that any investment in digitalisation should be aligned with their members’ needs. The members of ICMIF range from large market leaders to niche, affinity-based insurers, and most are small/medium-sized. So there are many different ways in which our members approach digitalisation: the large ones have set aside a specific budget for it and are already well advanced and smaller organisations are likely to go down that route later when the costs come down. Our smaller members understand their niche market and still strive to build relations based on quality and trust with their member-policyholders. Where digitalisation supports these relationship-building efforts, there are significant moves to embrace new technologies. This is particularly true in emerging markets that are doing more with digital technologies because they are more agile.

Bridging the protection gap is a recurring theme at most of the industry events in recent years. How are ICMIF’s members supporting this?
C.H.: ICMIF can proudly say it has put its money where its mouth is in dealing with this issue in an efficient and consistent way. In fact, ICMIF has been actively supporting the reduction of the protection gap since the 1960s.

In January 2015, we launched the 5-5-5 Mutual Microinsurance Strategy to help mutual microinsurance reach its full potential scale in five emerging markets with the goal of having a positive impact on the lives of millions of low-income households.

The five countries (Colombia, India, Kenya, the Philippines and Sri Lanka) were selected on the basis of several factors including our members’ presence and their outstanding work in their respective countries. Two years after the launch of this programme, over a million individuals (1,294,089 individuals / 258,885 households) who were previously uninsured are now insured by a mutual or cooperative insurer thanks to this robust programme and the support of a number of ICMIF members. If you are interested in reading stories or watching videos, I invite you to consult our dedicated page at http://www.icmif555.org/

We are also proving advocacy support with regards to regulation for mutual/ cooperative insurers in countries where regulation is not favourable. Through advocacy we are promoting enabling regulation for mutuals/ cooperatives, trying to create a space for mutual insurers and the key role mutuals are playing in insuring the poor and the underprivileged.

From the consumers’ perspective, what is the difference, if any, between being insured by a listed insurance company as opposed to working with a mutual or co-operative?
C.H.: I think the best way to answer that question is to let consumers speak. The Dutch national insurance association has carried out an independent survey which screened 48 insurers on six aspects of customer service: customer focus, expertise, customer contact, clarity, trust and satisfaction. The eight companies that came first were all mutual / cooperative insurers. The same type of survey commissioned in the UK by AFM, the Association for Financial Mutuals, showed that mutual insurers were given a ‘Net Trust Score’ of +32%, compared to financial public limited companies, which registered -5%. We also know from extensive reputation audits carried out in 2012 and 2016, that our sector is strongly associated with sustainability and long-termism by multiple stakeholders, including consumers. The customer experience for those who buy their insurance from cooperative/mutual insurers is often characterised by a more personalised experience, employees who care and better value for money. These aspects are what set cooperative/mutual insurers apart from many stock company insurers, and this is borne out by customer retention rates as well as Net Promoter Scores, which regularly far exceed the industry averages.

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What are the main actions taken by ASF that lead to the stabilization of the Romanian MTPL market? Also, can you estimate what are the most important benefits for consumers, as a result of the MTPL law?
Cornel COCA CONSTANTINESCU: The Romanian insurance market is facing a reset moment, after the consolidation at legislative level, following the transposition and the implementation of the Solvency II Directive and, also, the promulgation of the new MTPL law.

The new information contained by the MTPL law refer to concepts and mechanisms that create a general framework for market stabilization and set up the premises of a predictable evolution, from the perspective of premiums’ level and policyholders’ protection, including in their quality as injured. Regarding this particular aspect, I would like to mention: defining the category of high-risk customers by reporting to the reference tariff – also a new concept -, designed as an option to regulate the distortions appearing in the market. The reference tariff, calculated once a semester by an independent company with expertise in the field, aims to both inform and protect the consumers.  In order to increase the consumer protection levels, the secondary legislation issued by ASF to implement the MTPL law emphasizes the fact that the customer needs to be correctly and fully informed on all aspects, when the customer buys the insurance policy, as well as in the claims handling moment, e.g. specifying the bonus-malus class and pointing out separately the cost of the direct settlement service. At the same time, the secondary legislation aimed to clarify the sale of policies through electronic and online channels, given their increasing popularity, establishing the obligation to follow, at any given time, the same requirements, regardless of the communication means used.

In order to increase insurance coverage without using coercive means, the term for which an insurance contract can be signed became more flexible, now allowing for policies valid for one month or one-month multiples, although we would like this possibility to be an exception to the rule. The desire to insure the continuity of insurance policies was materialized by introducing the obligation to inform the client about the policy’s expiration date simultaneously with submitting a new offer, the client being able to opt for other insurance companies’ policies. Considering the importance of claims handling in the insurance economy and due to irregular and, sometimes, unfavorable practices, the need to regulate this activity more thoroughly was strongly felt. The bonus-malus system has been redesigned to encourage responsible and cautious driving behavior and to sanction negligence and recklessness, including the possibility of taking into account the driver’s history.

Romania has for the first time a dedicated law on MTPL insurance. Which do you think will be the main effects that these legislative changes will have on the local market?
C.C.C.: The application of these new concepts, such as the reference tariff, the high-risk customer and the direct settlement, at the Romanian insurance industry level aims to ensure a balance between the interests of the insured persons and the interests of the insurers, and to eliminate those premium prices “sideslips” that have affected the market lately, simultaneously creating additional protection for policyholders.

What other actions is ASF planning, in the future, for the stabilization and standardization of the Romanian insurance market?
C.C.C.: ASF is currently working with several state institutions, including the Ministry of Health, which has an important contribution in establishing criteria for assessing compensation for injured persons. The aim is to determine indicative standards which can help achieve a unitary and predictable practice in dealing with these cases, which will impact the premium prices as well.

Do you believe that these legislative changes will make the Romanian insurance market more attractive to investors? Do you anticipate new entries on the market (including companies with Romanian capital)?
C.C.C.: We always want new insurance companies to enter the Romanian market, we believe that the market has reached a stage where it is consolidating after a more difficult period, so an increase of competition and a diversification of offers are both welcomed. The Romanian insurance market has a high potential on the non-life insurance segment, and an even higher one on the life insurance segment and I am convinced that the investors know this and will want to take advantage of this opportunity.

XPRIMM: Consumer protection is very important for ASF. What measures does ASF take in order to continuously improve this aspect?
C.C.C.: Consumer protection is a continuous process: the measures are tactical and strategic, proactive and reactive, starting from the consumers’ legitimate interests and rights, completing the classical supervision that ensures market stability.  The means used are both reactive (solving complaints and reporting problems identified in their instrumentation) and proactive by monitoring and identifying unlawful or inappropriate behaviors, as well as potentially incorrect, unfair or fraudulent practices, deduced by analyzing the indicators resulting from petitions, as well as from mystery shopping activities, website monitoring and social media, as well as by analyzing contracts in order to eliminate potential abusive clauses. Also in the proactive area, we include an advanced system of assistance and information dedicated to the consumer, as well as financial educational campaigns aimed at all levels, consisting in the production of full-text presentation materials written in a language accessible to non-professionals.

Another component contributing to consumer protection is financial education, through which consumers develop skills that enable them to interact with financial intermediaries, to know the defining elements and risks of non-bank financial products, so as to make the best use of their rights and to fulfill their obligations.

XPRIMM: ASF recently modified the consumer petition procedure (Rule no. 18). What are the main changes brought to consumer’s benefits?
C.C.C.: ASF standard no. 18/2017 on the procedure for dealing with petitions relating to insurance and reinsurance companies and insurance brokers’ activity focused mainly on consumer protection issues, such as informing the consumers on their rights to seek alternative dispute resolution and insuring, by the executive management of insurers and brokers, the participation in alternative dispute resolutions, either by conciliation through SAL-FIN, or by mediation or arbitration, when requested to do so.

Other issues involved include the obligation to inform insured persons or injured parties about how damages are settled and about the legal basis of the solutions adopted to address all the issues contained in the received notifications.

XPRIMM: The Romanian insurance industry is adopting the European regulations. After the implementation of Solvency II, the IDD – Insurance Distribution Directive comes next. Are the local players ready to cope with this changes?
C.C.C.: The IDD Directive brings substantial changes to the way business is carried out, the relationship with the customer being, in particular, targeted by changes, becoming more standardized and “client oriented”.  The aim was to create a “level playing field” between investment products and insurance products with an investment component by implementing similar requirements regarding customer behavior rules (e.g. disclosure of conflicts of interests, differentiation between sale and advice).

New stipulations have been introduced regarding the packaged sale of products in order to protect consumers against possible “abuses” that may arise given the information asymmetry and the low level of financial education.  Taking into account the newly introduced requirements on the governance system, the implementation of the IDD Directive will trigger a review of processes and documentation of working with clients. The impact will be stronger for those intermediaries selling life insurance products, especially those with an investment component.

What other insurance market development projects are on ASF’s agenda?
C.C.C.: One of ASF’s particular interests is directed towards boosting mandatory housing insurance, inclusively by adjusting the legal framework to the current realities, so that this type of insurance will be accessed by as many real estate owners as possible.

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What is the role the Microinsurance Network plays in the global insurance environment?
Andrea KEENAN: The MicroInsurance Network is a multistakeholder network that provides for a forum for sharing innovations, ideas and concerns in the Microinsurance space.  Through networking events, seminars, webinars and publications we help to inform the general public on microinsurance but to also enable communication among various practitioners who wouldn’t otherwise have contact.  Since microinsurance is a global priority, the MiN does an excellent job of centralizing knowledge and sharing.

Microinsurance has mostly been seen by the insurance community as a solution for developing countries. How can this model be tailored for other regions of the world, e.g. Eastern Europe.
A.K.: Microinsurance is certainly more of a priority in developing countries, where a larger percent of the population is in the target consumer group of microinsurance.  However, “reverse innovation” can occur here, where lessons learned in the lower-income environments can be applied farther upmarket. Or, similar to Latin America, “mass insurance” can be offered which includes polices that are targeted at several different income groups.

For the sake of clarity – how would you define the relationship between microinsurance and inclusive insurance?
A.K.: There are many definitions out there on the goals and design of what can be considered “microinsurance” and I would hesitate to give false precision to my own perception.  So, in general I’d say that microinsurance and inclusive insurance are, in most respects, very similar concepts.  And as a group, the MicroInsurance Network focuses on the increase of financial inclusion through offering of insurance products.

What benefits are to be expected from implementing this model and what are the main challenges in doing so?
A.K.: Microinsurance helps with financial education, family planning, development of small enterprises and maintenance of health, and the products are typically designed to address the specific needs of any given population.  A virtuous cycle develops as this produces income smoothing, larger planning horizons and the development of financial wellbeing.  It is challenging because, to be affordable, scale must be achieved. Therefore distribution models often require partnerships or other creative solutions that are not easily achieved when operating margins are so small.

How do you see the relationship between social security and microinsurance, considering that in the regions where microinsurance has already been successfully implemented the public sector can not always raise to the expectations of those in need (while in example, in Eastern Europe, social security systems are in place).
A.K.: Social security does not always address all the needs of the working poor. Microinsurance products can enable the owner of a small business to take on additional labor, experiment with more profitable crops or create efficiencies with new equipment. It is intended to allow an individual, family or company to plan into the future.

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What are the main obstacles still remaining from creating a single market for financial services in Europe?
Nathalie BERGER: Despite significant progress in recent decades to develop a single market for capital, there are still many long-standing and deep-rooted obstacles that stand in the way of cross-border investments, which deter investors from diversifying their portfolios geographically. These obstacles have their origins in national law – insolvency, collateral and securities law, as well as market infrastructure and tax barriers.

There is evidence that tax barriers continue to hinder cross-border investment. Withholding tax procedures are considered as a major barrier to cross-border investment. Double taxation agreements concluded between states should normally allow investors directly or indirectly investing (among others) through investment funds to avoid double taxation, either by getting relief at source or by benefiting from full or partial refund. Total cost of withholding tax refund processes is estimated at € 8.4 billion per year.

Divergences in supervisory outcomes lead to cross-border spill-overs and unjustified differences in the supervision of the same risk. Deeper financial integration will need to be accompanied by increased convergence of supervisory outcomes across the EU and necessary adjustments to strengthen the supervisory framework in order to ensure that the capacity to supervise and manage risks keeps pace, in particular in cross-border and critical areas.

EU Member States are currently in the process of transposition of the Insurance Distribution Directive. How is this process developing? What feedback have you received so far?
N.B.: All Member States are currently proceeding with the transposition of the directive into national law. We are assisting them in this endeavour and have organised two transposition workshops to this effect. We are confident that the vast majority of Member States will be able to meet the transposition deadline of 23 February 2018.

What benefits and what challenges brings the Insurance Distribution Directive in terms of product information and conflict of interest management?
N.B.: The Insurance Distribution Directive (IDD) improves the standards for product information to be given to consumers before they sign an insurance contract. The newly created Insurance Product Information Document (IPID) will provide consumers with basic information on the main features of proposed non-life insurance contracts, allowing them to easier understand and compare the products on offer. For life insurance products and insurance-based investment products, insurance distributors are already obliged under the PRIIPs Regulation and the Solvency II Directive to provide comparable information documents.

As for conflict of interest management, IDD provides specific rules for identifying, preventing and managing conflicts of interest in the distribution of insurance-based investment products. These new rules are largely aligned to the standards applicable to the sale of regular investment products under MiFID II, ensuring a level playing field for sellers and guaranteeing consumer the same high standard of protection in all sales of investment products. In addition, the Directives provides rules requiring insurance distributors to make disclosures about their remuneration, on which basis advice is given (in particular whether they are limited to selling products from one specific provider) and on possible influences from companies belonging to the same group. Insurance distributors are also obliged to avoid conflicts of interest in the remuneration or incentivisation of their employees.

The General Data Protection Regulation is due to come into force in May 2018 but already there are many discussions relating to the costs of its implementation. What is your comment on that and, also, could you please elaborate on the main benefits for European consumers that the GDPR is offering?
N.B.: The data protection reform package helps the Digital Single Market realise the potential through (for instance): One continent, one law: a single, pan-European law for data protection, replacing the current inconsistent patchwork of national laws. Companies will deal with one law, not 28. The benefits are estimated at €2.3 billion per year; One-stop-shop: a ‘one-stop-shop’ for businesses: companies will only have to deal with one single supervisory authority, not 28, making it simpler and cheaper for companies to do business in the EU.

For businesses, this reform provides clarity and consistency of the rules to be applied, and restores trust of the consumer, thus allowing undertakings to seize fully the opportunities in the Digital Single Market. In the case of citizens, the reform provides tools for gaining control of one’s personal data, the protection of which is a fundamental right in the European Union. The data protection reform will strengthen citizens’ rights and build trust.

The European Commission has launched a Public consultation on the operations of the European Supervisory Authorities. What is the purpose of this exercise? Are we about to see changes in the financial supervision framework in Europe?
N.B.: The consultation is an opportunity for all stakeholders to provide their views on what possible changes may be needed to the current rules governing the ESAs so that they can operate more effectively and deliver on their tasks and objectives in full.

Our aim now is to identify areas where the effectiveness and efficiency of the ESAs can be strengthened and improved. A general review of the ESAs was foreseen for this year, and mandated by their founding Regulations.

The consultation focuses on these key areas such as (1) tasks and powers; (2) governance;(3) supervisory architecture; and (4) funding. We are focusing on optimising ESAs’ powers in the following 8 areas, as follows: work on supervisory convergence; non-binding measures such as guidelines and Q&As; work on consumer and investor protection; enforcement powers; international aspects of ESAs work; access to data; powers in relation to reporting and financial reporting.

In terms of future steps to be taken, we will have to wait for the feedback to the public consultation before proceeding but we will have to do an evaluation before we decide on the next steps.

One of the main risks for the insurance industry is the very low interest rates environment. How are you dealing with this at EU level?
N.B.: Low interest rates are currently of highest concerns for (re)insurers. The perception of the interest rate related risks worsened from the beginning of 2016. EIOPA conducted a stress test in last year to assess the insurance sector’s vulnerabilities to a combination of market risk adverse scenarios. It was based on a sample of solo insurance undertakings most vulnerable in a persistent low interest rate environment and a double hit scenario where, in addition to the low interest rates, the assets prices are also stressed. ​​

In fact, stress tests represent one of the regular supervisory tools that help to assess the resilience of the insurance sector to potential adverse market developments and to extract valid conclusions to support the stability of the financial system.

In order to ensure coordinated supervisory actions, following the 2016 stress test, EIOPA issued recommendations to national supervisors, inter alia: – to ensure that undertakings align their internal risk management processes to the external risks faced; – to review the clauses of the guarantees, their typologies, and the optionalities they carry to assess if the valuation of the technical provisions can be considered proportionate and prudent; and – to request a reduction in the maximum guarantees or in unsustainable profit participations offered in new business etc.

What will be the benefits of the Pan-European Personal Pensions product project for EU citizens?
N.B.: The forthcoming PEPP initiative will contribute to further develop EU capital markets towards sufficiently deep, liquid and efficient markets, benefitting investment and growth in the EU. A well-functioning internal market for personal pensions could contribute significantly to provide consumers with adequate choice of personal pension products with minimum EU quality standards protecting consumers and to provide them with adequate market access across the European Union.

Consumers, all over the EU, will benefit from the specific advantages of a PEPP, including when exercising their mobility (single market with standardisation, cross-border and CMU completion, and enhanced features for consumer protection). Also, a larger market provides more and better opportunities for consumers to save for retirement, with better returns and better products. It also means more and better opportunities to save for retirement across borders for mobile consumers and allows for additional opportunities to save for retirement for employees usually not covered by the regular state or occupational pension provision.

There are public discussions regarding the role that Solvency II Directive played in connection with the Mergers & Acquisitions market for insurance undertakings. Also, there are local insurers that complained about the impact of this regulatory framework. Could you please comment on that?
N.B.: We have no reliable information on the effect of Solvency II on M&A activity. As already announced, we will review the Solvency II Directive in 2020.

Can you comment upon the Romanian Government decision regarding the MTPL tariffs cap?
N.B.: In November 2016, the Romanian Government introduced a premium cap for MTPL insurance. This cap is in principle valid for 6 months (until 18 May 2017), but can theoretically be extended by the Government for subsequent periods of 3 months. We consider that this premium cap has a negative impact on the free competition in the Romanian motor insurance sector and puts significant pressure on the business activity of insurance undertakings concerned.

It may also have a negative impact on the quality of insurance services provided to consumers. This price regulation in the MTPL insurance sector raises serious concerns for us as to its compatibility with the Solvency II Directive (especially Articles 21 and 181), as well as with the case-law of the EU Court of Justice (in particular the decision in case C-59/01).

Solvency II prohibits a prior approval or a notification obligation of premiums and, following the court’s interpretation, also direct price regulation, unless a general price-control system exists in a Member State. As a general price-control system is not in place in Romania – we expect that the premium cap not be extended upon the expiry of the current measures on 18 May 2017. We will monitor the developments closely and take the necessary decisions, in order to ensure full compliance with EU law.

What consequences will Brexit have on the European Insurance market, in your opinion?
N.B.: We very much regret the UK’s decision to withdraw from the European Union. And, as soon as the UK is ready, we shall start negotiating in a constructive manner. Given that both sides have less than two years to close a deal, we are advising firms to prepare for the UK’s withdrawal from the EU as of now.

XPRIMM: Thank you!

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As global re/insurers are struggling with low interest rates, currency fluctuations and a changing geopolitical climate, which are the most important challenges the reinsurance industry has to currently face and how do you plan to tackle them? 
Fadi AbuNahl: Slowing economic growth, continued pressure on pricing, emerging risks (e.g. Cyber hacking) and regulatory changes such as Solvency II in Europe, C-ROSS in China, IRDA in India, and new South African regulations are some of the main challenges we face.

To tackle, or counter these issues we strive towards improving our competitive position and our value proposition to partners by strengthening our underwriting capabilities, and enhancing client services such as Risk Engineering and Training. Also by diversification in lines of business and efficiency through improvements in technology and mobility.

In the number of future plans that you mentioned previously you spoke about the Asian market. How is the Asian market, China in particular, included in your strategy? What future do you see there? 
F.A.: Asia has been an important market for TRUST Re since inception, its growing importance propelled the opening of our Labuan Branch Office in Malaysia back in 2004 to enable us to better service our clients in the Far East and ASEAN regions. The capabilities of this branch continue to be strengthened.

More recently, we are working closely with several stakeholders to be able to provide solutions for the One Belt One Road (OBOR) initiative which involves projects across the Afro-Asian markets.

Regarding China specifically, we are monitoring regulatory developments there closely. We expect that ongoing implementation of C-ROSS may result in a protected market for domestic reinsurers – knock-on effect of more volatile reinsurance and retro pricing.

However, establishing a physical presence in China remains an attractive prospect for us in order to have direct access to some of the biggest countries within our geo-scope.

Which are the most challenging aspects of a reinsurer activity in the CEE, possibly in need of further improvement? What are the expected measures in this regard? 
F.A.: Here we can refer to our market survey conducted in 2016, “The Outlook for Insurance and Reinsurance in Central and Eastern Europe”. Understanding the challenges of reinsurance activity in the CEE also means understanding what stakeholders perceive, what they want, and meeting these expectations.

The first challenge to overcome is building awareness of insurance, to ultimately increase insurance and hence reinsurance penetration. More education and training and improved technical skills were seen to be necessary as well. Combined, and once delivered, these factors would help to offset challenges for reinsurers.

Competition is also a challenge, as merger and acquisition activity is anticipated; thus to survive reinsurers really have to offer added value. Those who innovate will be those who have the best prospects of surviving in an increasingly competitive market.

How would you describe the progress made by your company last year? 
F.A.: Building resilience was critical to our performance last year. Market conditions were challenging, we continued to face the threat of emerging risks. We were proud that both Standard & Poor’s and A.M. Best affirmed our A- rating with stable outlook, and S&P upgraded our Enterprise Risk Management from ‘adequate’ to ‘adequate with strong risk controls’.

We made good progress towards our objective of expanding our service offering to our clients, introducing Aviation and Surety lines of business to our product offering. Also progress was made on a number of strategic projects which aim to increase operational efficiency. We also restructured the organization so that departments with common responsibilities can interact more closely and to improve operational synergy and efficiency.

Which are your main objectives for the following period? 
F.A.: Our focus will always be projects which support the achievement of our Board approved strategic direction.

Improving our value proposition which differentiates us from other reinsurers is a key point of focus. Included in this is making sure we provide effective solutions for our partners, a wide range of products, value-added services and tailor-made solutions. This is in-line with our mission “to be innovative in providing reinsurance solutions and prompt responses, always”.

Maintaining our strong, competitive position and strengthening relationships with partners is key as is further embedding of risk management in all levels of our organization.

Further improving our ability to lead by geography and by product is also a major aspect of our strategy, as is enhanced use of analytics.

What is the added value that TRUST Re is bringing to cedent companies in comparison with some of the other market players? 
F.A.: Our Thought Leadership strategy and knowledge-sharing add value to cedent companies. Our expert team provides tailor-made in-house training, workshops, and seminars and participates in major industry events as panel speakers and in the production of white papers.

Business Partners’ Seminars are held 2-3 times a year in various territories where TRUST Re operates. Last year a seminar called Managing Trends of Property & Engineering Insurance was held in Vienna for our Business Partners from Central and Eastern Europe. More recently, in April this year, we held a “Risk Management & Underwriting Practices” Seminar in Moscow for more than 30 senior insurance and reinsurance executives in Russia.

We also support market research activity so that both we and our partners can understand market trends and future business opportunities.

Additionally, there is an advantage in the diversity brought by the TRUST Re team itself, which comprises 40 different nationalities thus enhancing our ability to understand better the markets and cultures with whom we work.

Which are in your view the most “promising” business lines in the CEE market and how is your company intending to take advantage of the opportunities offered by these lines? 
F.A.: Here also, we can refer to our market survey conducted in 2016, “The Outlook for Insurance and Reinsurance in Central and Eastern Europe”. One of the reasons for conducting it was to understand market trends and opportunities, which is equally vital for us and our business partners.

One of the areas looked at in this survey is growth expectations for various lines of business. Survey participants thought growth in mainstream risks would likely remain fairly subdued. As a whole, in the CEE market they were thought to be highest in Life, Healthcare and Liability. Also important to note is that in a risk such as Cyber, which currently has low participation, 40% expected to participate in it by the end of 2018 compared to 5% today. Moreover, Life and Health is also likely to grow as a result of people realizing they cannot rely on state pensions.

As part of our objective of diversified growth, amongst others, we are exploring Cyber as a future part of our risk solutions. It is a fast growing sector and its increasing demand is something we cannot ignore.

Similarly, back in 2015, we introduced Life & Health reinsurance, it represented a natural extension of our service offering and reinforced our strategy of ensuring that we deliver products and services that meet our partner’s needs.

Thank you and all the best for the future!

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Worldwide, the IIS – International Insurance Society is an well known and recognized organization, but in the Central and Eastern European financial markets there still might be room for a presentation. So, what is the role of the IIS?
Michael MORRISSEY: Well, the role of the IIS is to promote growth and innovation in the insurance industry by exchanging ideas and strategies between all stakeholders. By that I mean that there are many industry organizations, some of them regional, some focused on certain lines of business, but there are only few truly global. But even the few global ones have a niche in which they stay focused. Our membership from 102 countries currently includes AXA, ALLIANZ, Munich Re, Swiss Re, Nippon Life, AIG etc. It also includes the Green Delta Insurance Company in Bangladesh or a Nigerian life insurance company – and anything in between, so there are big companies as well as small companies, developed markets and emerging markets. Also, we have about 50 national insurance regulators plus 130 insurance scholars from universities around the world, the global insurance leaders of the professional advisory firms etc. So, among our members are the heads of insurance for KPMG, Deloitte, EY and PwC; the heads of insurance globally for BlackRock, Deutsche Bank, McKinsey, Milliman, DLA Piper, Clyde & Co., just to name a few. So, in other words, we believe that the more inclusive and diverse the membership is, the more robust the exchange of ideas can be and the better the outcome. I’ll give you an amusing example. At our big annual conference, two years ago, one of the management board members of a major insurer came up to me during a break and said “You know that fellow over there?” and I said “That’s Mr. Lhendup, he runs the Royal Insurance Corporation of Bhutan” and he asked me a question about our business and I must admit I had a hard time answering it. And I said “Well, Klaus, that’s what we think it’s one of the key values of the IIS. We don’t think that the best ideas necessarily come from the biggest companies from the biggest countries. We think good ideas can come from unexpected places and if you put all the industry’s stakeholders into the same room, you end up with better ideas. So, that’s the idea of the IIS. I may also say that, secondarily, as it has evolved, promoting and emerging the insurance development form is a particular focus.

You do organize a Global Insurance Forum. Last year it was hosted by Singapore, next year it will take place here, in London. What is the purpose of this conference, knowing that there are so many events out there?
M.M.: This is different. This will be our 53rd edition, which itself tells you something about the value of this event. We have each year more than 500 industry leaders from more than 50 countries, so, again, it’s a diversity, it’s the inclusiveness of industry leaders to get an opportunity to address the most important issues of the day. We used to go to a different city every year, with occasional repeats. We decided recently that we should really have a hub city strategy and rotate for the convenience of our members and logistics, so now we do London, New York. We had to think hard about our region hub and it was either Hong Kong or Singapore and we decided on Singapore. It’s really the greatest assembly of all leaders in the industry of any gathering. We’ll also have military, national defence experts. We try to bring a different prospectors to the big decisions of our industry.

You’ve mentioned in your public appearances about an increasing number of challenges for the global insurance industry. Is it fair to say that we are living in a time of structural change?
M.M.: Well, certainly accelerating change. It’s true: we lagged the banking industry, we also lagged the asset management industry or some other industries which is why some companies are struggling and why there are also opportunities for new entities.

Which one of these will most likely disrupt the industry the most? Technology, Peer2Peer insurance…
M.M.: Well, in general you say technology is the one that has a lot of manifestations and the industry has been slow to adopt new technology for the last 50 years, whether is simply using computers to increase processing speed 30-40 years ago or other factors. For a long time it didn’t threaten their basic position. But now young buyers don’t care if the insurance company has been in business for a hundred years. I think about the commercials and the advertisements that I used to see 30 years ago: there were some references to the company being in business for 150 years, but young buyers don’t care. They don’t care if the company has a multibillion dollar balance sheet or not. They are spoiled by an entirely different level of customer experience. You know, people who buy products from Apple or people who go to Starbucks have a different expectation of what they get for the money they spend. They want something different, they want something better. And it’s hard for legacy companies to adjust. It’s hard from the change of computer systems, it’s hard from the change of their attitudes. So it’s giving an opportunity for new entities within the industry – I spent a day at Google recently and the group of insurance companies’ CEOs were invited there to talk to them and the tone of the meeting was very friendly, but the undercurrent of the meeting was “we would like to have a cooperative relationship with your industry, but if you don’t want to have that kind of relationship, we will just come into your business on our own anyway”. This feels threatening, but they are very much in the insurance industry; Amazon is in the insurance industry, other companies are getting into the insurance industry – because they see it as big and maybe easy pickings for them. There is a lot of arrogance there. But they are smart guys. There is a saying in Texas: “If you can do it, it’s not bragging!”… So, there are those external completely new sources for competition. But even within the industry, there are entities that made it by not having a big legacy system to support. For instance, for a US Property & Casualty company, the expense ratio is somewhere around 30%, roughly half administrative, roughly half compensation to sellers, whatever they may be. Can you think of another product this day and age for which 30% of what you pay for it goes to those costs? Therefore, if you start a new company you can have a leaner system and that is not doing something revolutionary at all. This is using tools that are already available, such as outsourcing. You mentioned Peer2Peer insurance: in some ways is like “old wine in new bottles”. And by that I mean that P2P insurance structurally is not much different than affinity-based mutual or cooperative insurance. It is like risk retention groups.

On the same topic: we recently had a meeting of the World Economic Forum’s insurance group in Munich. One of the presenters was Dan Schreiber, the CEO of Lemonade, the famous P2P carrier. As I heard him talk I realised that the efficiency difference and the lower cost proposition wasn’t due to the fact that is was P2P but due to it being a new company. By starting from a blank sheet of paper they could adopt behavioural analysis-driven underwriting modelling and actuarial work, block chain-processing technologies, internet sales etc. Is it more efficient? It can be. Because it is P2P? Not really.

So the bottom line is that it isn’t really that different than mutual business model. I’m not saying it won’t work, all I’m saying it is not really revolutionary. However, traditional carriers will have to adjust in the future so it is tough for legacy companies.

Understood. But moving forward to a different topic now, you are also advising the United Nations on the insurance related issues. Can you share some of your common areas of interest in this regard?
M.M.: Let me give a quick history first. In 2012, when the U.N. was preparing the launch of the Principles of Sustainable Insurance (PSI), they approached the IIS to review the principles prior to the launch. As we were communicating with them about the final text, I said, “who would be at the ceremony from the insurance industry to hear this important message?” “We’re having our annual conference in Rio, why don’t you bring the team and launch the PSI at the IIS Global Insurance Forum where we will have 600 insurance leaders from 55 countries and all the world’s insurance media in attendance, and really make a splash, really have a big impact. They decided to launch the PSI at the Forum and were very happy with the outcome. It opened their eyes to the diversity of our organization and that also opened the door to us working with other international organizations such as International Labour Organization, the Every Woman, Every Child program, which expands healthcare opportunities for women and children, and the U.N. Development Project. The IIS advisory role in the development of PSI, ultimately led to the formation of the Insurance Development Forum (IDF). Through our work with the PSI, and through our diversity, the IIS became the incubator of the IDF and is now its permanent secretariat.

The U.N. has been involved in several projects aiming at bridging the protection gap. From this angle, what can a global society do, in order to increase the penetration level? 
M.M.: We have some education to do. In example, in California, earthquake insurance is rarely available, because the take-up is lower than 10%. That is not smart. It’s irresponsible for people not to buy this coverage. In the Mid-West of the United States there is plenty of flood insurance available, but people don’t buy it and then they cry after a disaster has occurred. So, we need to do more education with people in order to make them understand that bad things don’t only happen to other people, they can also happen to you. And, of course, work with the governments to make sure the insurance really is available. None of the Sub-Saharan African countries with the exception of South Africa had either the financial resources or frankly the expertise to have catastrophe insurance plans. Now, the African Risk Capacity has been formed, there are more than 20 sub-Saharan governments involved. These governments pay the premiums for a cover that’s parametrically triggered, which is a great thing. So, it’s not only the education of consumers, but also the education of governments. And there are ways to do this but it is a big mission. There is nothing wrong in saying that the insurance industry wants to help people avoid these calamities or recover from them, but that we also want to expand our market.

When we first started talking with the U.N. we kept in mind that most of those people have never worked in the private sector. So there is not only ignorance but cynicism about for-profit organization – so it took time to explain that this is a legitimate way to expand our business.

Chronologically, the first protection gap that we are targeting is that with respect to natural catastrophes. In example, when Hurricane Sandy hit New York City, almost 15% of the losses were insured. When the Chilean earthquake struck 2% of losses were insured; in the Thai floods about 10% – so there are huge gaps. However, there is an equally large protection gap on the other side of the industry: life& health, whether this is expressed as retirement saving gaps, access to health insurance etc. So down the road this will be just as important in the next 2-3 years, although currently it is not so visible in terms of what you might have read in the media.

Huge infrastructure spending needs around the world are financed by insurance companies and pension funds but in most countries insurance investment regulation is based on a kind of 1970s’ frame reference: bonds are safe, equities are risky; short term is safer, long term is risky; publicly quoted is safer, private investments are risky. If you add all those things together and understand that it is on that basis that regulators assign capital charges to make investments, it means that insurers are steered towards investing in bonds, especially in Government bonds, because those are the safest. Tell that to the Greek or Italian insurers!

How should regulators deal with this?
M.M.: We have to educate them that risk is different than it was 30 or 40 years ago.

That is quite a bold statement!
M.M.: I know. OK, you’re absolutely right. …discuss with the regulators. As long as we have this in place, the money is not going to go where it can do most good. So that is an important effort of the IDF. You can call it an education, you can call it discussion. But regulators have to be shown the evidence, in a non-confrontational way, that risk profiles have changed. Remember that they have a dual role: prudent regulation aspects are important, but the other role is providing adequate access to insurance in a certain territory. Because if you focus entirely on prudent regulation and your laws are so bulletproof that no insurance company can ever go broke there, but your people don’t have access to a range of insurance products on an affordable basis, what have you really accomplished? We need to encourage regulators to broaden access to insurance. China is only country I know that explicitly in its insurance law says that the insurance industry can be a driver of the economic growth and not a derivative. That’s a powerful statement!

Thank you!

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The GENERALI Group, included by MIT in the list of the 50 smartest companies on the planet, has been focusing on the complete digitization of its key processes. What are the main projects and what impact will these have on distributors and customers in the foreseeable future?
Valter TREVISANI: There are numerous projects and ongoing initiatives to digitalize our processes and products so I wouldn’t be able to do justice to them all here. Let me start with describing the ambition which drives us forward and I’ll also give a few examples.

Our goal is a GENERALI which is ‘simpler and smarter’ for our clients. This cuts right across everything we do from the initial contact, through to finalizing a policy or making a claim. Our starting point is to ensure that the platforms on which we operate are seamless from first contact through to renewal or claims. So when an initial enquiry comes online a follow up meeting which might take place in a branch doesn’t require the client filling in the same documentation in hard copy! We need to ensure that our platforms cut across technologies and all information can be found easily and in one place.

Then, looking at our contact with our customers we need to interact in the way the clients want. In many cases that’s when they are on the move so in Italy we’ve provided around 3.000 agents with tablets, which also include the ability to accept digital signatures. We also have a pilot program where a client shares his driving data and we can provide advice on improving their performance on the road, which over time will help reduce the premium. Finally, we also have new products and services, such as the Vitality program that provides many more customer touch points.

Overall, we are looking to remove delicate points from our interaction with our clients and make it an experience that resembles the best of what you see amongst online retailers in terms of convenience and ease.

Innovation, and mostly fintech, is considered to be a game-changer for the insurance industry. What trends have you identified so far and how has the Group reacted?
V.T.: Telematics has been and will continue to be a game-changer. We’ve been a leader in this field and I believe that it really does allow for a different approach to motor insurance. I am excited by the fact that we are expanding our offering in Germany and increasingly we are chosen as a partner by auto manufacturers. This trend is now expanding with demotics, which is capturing the so-called ‘Internet of Things’ within home connectivity. It’s an interesting area in rapid development. We’re starting with the home assistance services where are able to leverage off our Europ Assistance offering, but we’ll see what comes next.

Also, on the life insurance side, there is an enormous innovation potential around data and the ability to structure it in useful ways. We have seen some interesting developments in the health and protection sectors. But along with this we also have to be very mindful of the way we do it and respect the desires of our clients. Most importantly, it is a must to take into consideration that the core purpose of insurance and the pooling of risks remains as valid as ever. We are not looking to individualize our offer but to provide new and hopefully better services and products.

Finally, I think the biggest game changer is the impact of mobility. An increasing number of clients organize their lives, interact and use mobile devices as their main point of contact. This links in with what I said previously about seamless operations behind the scene. GENERALI will win and retain clients by virtue of our technical excellence and making that experience as pleasurable as possible.

What is your approach towards implementing new projects that rely on digitization, considering that the Group is now present in many countries with different economical but also social background?
V.T.: There is no hard and fast rule. As a business, you always want to make the most impact for your investment, so you will do a full market analysis to help drive your decision. However, we also consider where the expertise is and where we can create an edge. A case in point is when we launched our innovative motor insurance app and product in Turkey. We set up a ‘SWAT’ team comprising of professionals in Germany and the CEE to help in its development and roll-out. The end product was a great success and the experience was something we could take back to the respective markets.

Telematics has been on the agenda of different European insurance groups, but GENERALI managed to steal the attention. Could you give us more insight into this?
V.T.: Genertel was the first online offering in Italy and continues to be a very innovative company. It enabled us early on to build a deep expertise in this space. We have grown solidly in Italy with now over one million policies.

The acquisition of MyDrive is also an important accelerator in keeping us ahead of the curve. This is a highly sophisticated data-analytics company, based in the UK, which we acquired last year. I think that helped bring us together with Progressive, the US leader in telematics, where we have an R&D agreement. I am confident that this will also provide some interesting developments.

In how many markets does GENERALI currently offers telematics or PAYD solutions and with that results? What percentage of the total motor business (in the countries where it is available) comes from telematics-based products? 
V.T.: As mentioned before, in Italy, we’ve already reached important results using a variety of value propositions and in this market – combining the offering of GENERALI and Genertel – we achieved a penetration around 20% of telematics policies on the portfolio, while the penetration on new business is around 40%. Apart from the mileage based product, GENERALI recently launched also a new behavioral product with innovative real time coaching functionalities – GENERALI Sei In Auto Con Stile, that enriches the product palette of the Company.

Then, the Group has active PHYD offers also in GENERALI España in Spain and GENERALI Poistovna a.s. in Slovakia, where in 2015 it was launched the SOS Partner product, the first solution of this kind in the Central and Eastern Europe. The product – which utilizes a telematics windscreen box with a panic button, a microphone and a speaker – allows advanced assistance to be provided to the driver and his/her entire family both in case of breakdown and emergency. Thanks to the accelerometer present in the box, road accidents can be detected automatically; in that case a service request is directly sent to the Europ Assistance operations center and the customer can speak directly to an operator to check the type of assistance required and/or to get immediate access to the emergency services. At the same time the product is used to determine the driving style of the customer and uses a Pay How You Drive algorithm to reward virtuous drivers through renewal discounts both on MTPL and Material Own Damages.

In addition, starting from July 1st 2016, two new telematics solutions were launched within the GENERALI Group in Germany. GENERALI Versicherung and Aachenmunchener Versicherung launched respectively GENERALI Mobility and Telematik, innovative products based on a smartphone app solution and on a behavioral profiling which is allowing to provide customized rewards to customers driving safely.

We aim at reaching new challenging objectives going forward, in particular we are not aiming at growth in itself, but at a sustainable tradeoff between growth, excellent technical results and customer satisfaction.

Since the motor insurance markets are structurally different, we are convinced that there’s no “one solution fits all”. The value proposition and underlying technology need to be customized to the local specifics. In particular we have to pay attention at the customers’ needs and the distribution channels of each market in order to define the right value proposition and pricing approach.

Do you see telematics as a transitory solution for personalized pricing until the large scale adoption of autonomous cars? 
V.T.: No, telematics will be an integral part of autonomous driving. The data will probably be more structured, but equally important to delivering a safe experience for road users. We are still early in that journey.

How do you believe autonomous cars will impact the insurance industry? How are insurers preparing for this next step in motor insurance?
V.T.: As an industry, there is still some thinking to do along with the development of this technology. A key area is around the shift in liability as new, different actors will be involved in road safety issues. The list of issues is long: is the software faulty, was the vehicle hacked, was the latest update installed? I could go on. It will require an open and cooperative approach from governments, regulators, insurers, software developers and car manufacturers to name a few. We’re honored to play a part of this discussion as participants in the European Commission’s GEAR 2030 working group. But I think it’s really important that we try to identify and agree on some global standards, it would ease adopting of this fascinating technology.

On the underwriting side/ damage assessment could we see drones playing a more important role in the near future? 
V.T.: Yes, in line with regulatory developments, we will. In the Czech Republic, our subsidiary, CESKA pojistovna, is using drones for surveys, inspections and detailed documentation of the location of losses. This technology makes this process easier and more effective and helps in claims handling. The detailed pictures produced identified precisely the real extent and cause of damage which it would not have been possible to assess without this technology. The clients themselves were pleasantly surprised by the advanced technology CESKA pojistovna is using. In several cases the clients even agreed to the use the documentation produced by the drones as the main support for determining the level of damage.

Currently, drones are used for inspections of halls, buildings, large premises, construction machinery, cranes, planes and trains, bridges, dams, chimneys and tall buildings, agricultural plantations and crops, large floods and fires. But as the technology improves, such as longer battery life, it is even possible to think about it moving from bigger, commercial lines into the retail space for example for road traffic incidents.

According to previous public statements of GENERALI’s leading representatives, the Group was prepared to invest EUR 1.25 bn to transform the business. What is the main outcome of this endeavor so far?
V.T.: Actually one of the main outcomes has been to provide greater focus on those things that are really going to make the difference for our business and by definition our clients. The industry is in a phase when we have to be incredibly cost conscious. This is partly due to low interest rates and partly because the pace of technology is such that you need to learn fast and be smart about allocating resources.

I believe a result of this is that we’ll see many more partnerships and collaborations between established players like ourselves and not only Fintech, but technology players in general. It’s perhaps a more mature approach, with each party recognizing the strengths they bring to the relationship. For example we might have the distribution capabilities or the capital, but lack the ability to optimize our online presence on a branch by branch basis.

How do you see the future of the insurance business in the light of these new and upcoming technological changes? Is peer-to-peer insurance an opportunity or a threat to the conventional way of doing business, from your perspective?
V.T.: I think we work in a business which is arguably one of the more exciting ones at this moment in time. It really does have everything to play for and is in the midst of some pretty fundamental changes.

Having said that, I do believe it will be very hard for a start up to have an impact on the scale of a business like GENERALI. Peer-to-peer may be an opportunity, but why is it not something which can also be delivered by existing players? We are, of course, already regulated and have deep risk management skills.

So big businesses like ours can be agile. But the other thing is that ours is very much a people business. A company can have the most amazing platform in the world, but if they cannot be there with the same immediacy and ease when you have a car accident or your home gets flooded you’re missing a big piece of the customer experience. Being there at the moment of need is a crucial part of this industry.

According to your official resume, you were in charge of the working team paving the way for GENERALI Group’s entrance in the Chinese market, soon followed by India, but also responsible for the CEE markets. Could we have your thoughts on the main challenges posed by working in such different cultural environments? Which are the main differences in terms of customers’ expectations?
V.T.: There are obviously local differences, so it’s very important to be able to adapt your offering to take those into account. But, digitalization brings with it a certain degree of homogeneity in terms of access and interaction. An obvious example is allowing clients to be in touch on the move through portable devices.

A real challenge in this regard is the various regulatory environments and lack of harmonization across the world. Technology breaks down these frontiers and regulators need to have the agility – and courage – to stay on top of these developments. What we need is a global approach to regulation and issues such as data protection or privacy. I know this is an ambitious task, but it would really help the industry deliver the new products and services it is capable of and also generate jobs and growth!

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Which do you believe will be the impact of the new European legislation (Solvency II & IDD) on the insurance activity from an insurer’s standpoint as well as from the customer’s perspective?
Tadej COROLI: I believe that the impact is positive. The objective of Solvency II is to harmonize legislation in the EU, which with an upgraded system of risk management provides greater financial stability of insurance companies and greater security to policyholders. The latter is also contained in the Directive on insurance distribution, which brings an even more comprehensive overview of insurance towards increasing the role of policyholders, i.e. of the customers. It will be important that best insurance practices continue to evolve and, consequently, the trust and partnership between insurers and the insured.

As the current environment has specific challenges for insurers, do you see any consolidation taking place within the areas you are active in?
T.C.: It is highly likely that in some markets the insurance sector will have to be further consolidated, since the present structure is too fragmented. As a consequence of the already implemented and the upcoming legislative changes in the medium term, a certain impact can be expected on the ability of the insurance industry as a whole, and especially of some individual players in terms of underwriting. In general, I believe that this could have a greater impact on smaller insurers as they have to comply with relatively higher capital requirements and at the same time – like others – operate in face of currently lower returns on financial investments.

Do you plan on entering other markets in the CEE / SEE region in the near future?
T.C.: The insurance markets in the Adria region have potential for growth. In line with our strategic guideline, the TRIGLAV Group will continue to strengthen its position in the region and to develop as the insurance hub of South-East Europe through organic growth, however we do not rule out potential takeovers should an appropriate opportunity arise. We will continue to consolidate our position, and we will act prudently, aimed at long-term increase in the value of the Group. We see special opportunity in the health and pension insurance segments, where important steps were taken recently. Furthermore, we are actively considering the possibilities of digitisation in the broadest sense, including the opportunities to develop innovative business models with which we want to get even closer to customers.

How have you managed to maintain a leading position in a period when the CEE markets were targeted by the large international groups?
T.C.: We are aware that we are operating in a highly competitive and demanding environment, in which specificities of individual insurance markets play an important role. In the markets where the Group holds a high market share and a leading position, the consolidation strategy has been and will continue to be pursued, whilst on the remaining markets, where the Group’s presence is still being built, focus has been and will be on strengthening the Group’s market position. In all markets, we will strive to take full advantage of the competitive advantages of the TRIGLAV Group, such as the rapid and efficient claim payment system, the strength of the TRIGLAV brand, the wide range of products and services while ensuring long-term return on invested assets and increasing productivity through synergistic effects.

Which is the most dynamic market you are active in and which is the most competitive? Regarding the customers, is price still a defining factor in purchasing insurance?
T.C.: In the first six months of 2016, premium growth was seen on all the insurance markets outside Slovenia. In Croatia, our biggest market outside Slovenia, the insurance premium of Zavarovalnica TRIGLAV was 12% higher, whilst the highest premium growth of 20% was recorded in the Serbian market. In general, the Serbian insurance market is one of the most perspective in the Adria region. In the last three years, total premium was up almost 44%. The TRIGLAV insurance company headquartered in Belgrade recorded a written premium increase of as much as 88%, which is even substantially above the average growth of the insurance market. The Slovene insurance market is characterised by a high degree of concentration with strong competitors. But as we expected, the need for insurance services in the Adria region is increasing in line with its getting closer to the European Union, and the same time individual markets are growing. We note that the consumer behavior of policyholders has changed, and at the same time, we are witnessing the aggressive competition. We are well aware that in difficult times the price of insurance is important to people and we therefore try to meet them halfway with good products and different offers containing discounts. In my opinion, it is most important to find the right balance between price and quality of services.

As information is becoming more accessible to customers (Internet, social media etc.) do you see any changes in their behaviour?
T.C.: Our customers are increasingly using the internet and mobile devices, especially smartphones and tablets. More and more customers search for information and compare offers on internet, which definitely provides an opportunity for development. The development of our services is focused on multi-channel communication and excellent customer experience. Expanding the range of smart and connected products and services has changed our cooperation with customers, because our service is now faster, more user-friendly, etc. The foundation of our insurance business is our proactive marketing approach, increasing the efficiency of the sales network and developing highly competitive products and services specifically tailored to customer needs. It is important to be aware that the insurance financial products are rather complex, requiring more understanding, and due to their complexity can consequently be less suitable for sale via the internet. But certainly not all. However, the current personal contact, advice and assistance in the selection of a particular product remain an important component, like for example, when buying a car.

Which do you believe it is the insurers’ role in increasing the customers’ financial education? Do you believe that insurance awareness is an issue within the countries you are active in?
T.C.: Understanding of insurance services is an important component of financial capability, which enables an individual to make the appropriate choice. When choosing an insurance product, people need to understand the risk faced and the risk-benefit ratio derived from any insurance or general financial product. It is crucial that any individual should be able to formulate their needs, and understand the range of insurance services and consequently choose the insurance that best suits him. The development of the insurance market proves that our typical customer is thinking about how to ensure a safer future for himself and his family.

Which are your main objectives for the following period?
T.C.: Our focus lies on core insurance business. Satisfied clients will continue to be our main concern and focus of activities. We will put emphasis on the development of our services, the availability and diversity of sales channels, which are increasingly supported through online operations, and the strengthening of the sales network on all markets of the Group. This is our comparative advantage in Slovenia, and we are transferring this practice also to our markets outside Slovenia. We effectively achieve the set strategic objectives, which is reflected our solid business results. In the long term, I see an opportunity for growth in the health, life and pension insurance.

How would you comment upon the costs of implementation of the Solvency II Directive?
T.C.: After a period of careful preparations, which was going on since 2007, we met the requirements and adapted to the changed regulations regarding Solvency II and entered into 2016 with sufficient capital strength also recording to the new requirements. The Company’s risk profile is adequately balanced and represents a guarantee for long-term, financially stable and profitable operations. The new European directive has primarily significantly influenced our business culture; from focusing on compliance with the rules, we as insurance professionals are now focused on more active risk management. For the purposes of risk management and reporting, the relevant software was installed for risk monitoring and reporting in compliance with the Solvency II Directive requirements. Setting up a system required investment in new software that actually upgraded our previous efforts. The investment in the form of a variety of resources has been challenging, but we believe it has paid off and will continue to pay off in the future. As I pointed out in the beginning, the new regime encourages even greater financial stability of insurance companies and enhanced safety for all policyholders.

Thank you!

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How would you describe the current state of development of the Polish insurance market?
Damian JAWORSKI: The level of penetration and insurance density in Poland is about 3% – which is much below the world average. The average expenses on insurance products in Poland are 5 times lower than of the average European Union resident. In this sense one can say that the Polish market is still developing and highly dependent on the welfare of the society.

Due to the size of the country the Polish insurance market has a leading position in Central and Eastern Europe with 44% share in total premium of the region. Poland is classified in the middle of the scale of UE markets – ranked 12th in the EU with a 1.2% share in terms of gross written premium. In absolute terms gross written premium exceeded EUR 13 bn. in 2015, with more or less equal share of life and non-life business. Comparing with previous year results the Polish insurance market entered into a slight stagnation period.

What are the main challenges the insurers in Poland are facing?
D.J.: The key challenge is still misselling. There are still pending issues relating to insurance premium adequacy, especially in the motor insurance resulting in particular from compensation as a result of bodily injury and high pricing competition among insurance companies.

Last but not least implementation of Solvency II requires a lot of efforts in preparing the KNF as well as all market participants. It is not so much a pressure point, but rather an organizational challenge.

January 1st, 2016 has market the introduction of the Solvency II all across the European Union. What is the current status of implementing this Directive into the national legislation in Poland?
D.J.: Transposition is completed. The relevant Polish legislation was amended and published in November 2015.

Consumer protection is becoming more and more important for all national competent authorities in Europe. What efforts have been made in this regard?
D.J.: It is an issue of significant importance in Poland and a subject of due care of more authorities than just the KNF. From our perspective we believe that consumer protection becomes more efficient when it is focused on the origins of problems. Thus the KNF issues guidelines regulating internal processes of insurers. In April 2015 the KNF adopted guidelines on motor claims handling. Although these guidelines are non-binding I am happy to say that they are observed nevertheless and they give insurers a push to take a turn for more client-friendly practices. The law was recently changed and starting from 2016 KNF can officially issue recommendations for insurers. A week ago KNF has issued recommendations on product management and examining suitability and appropriateness of insurance products.

What tools are used by KNF in order to monitor the level of consumer satisfaction on the insurance market?
D.J.: Our primary source of information are clients’ complaints. Sometimes even a single letter can indicate a serious problem concerning a particular insurance company. All complaints are analysed and adequate actions are take. For instance, the risk assessment framework includes this factor in scoring the company.

How many cases of non-Polish companies interested in operating on the Polish market have you had so far and what are the consequences of their actions upon the market and the consumers?
D.J.: Irrespective of a still significant share of PZU in the Polish insurance market, its large part is dominated by subsidiaries and branches of foreign companies. Currently 59,49% of the market in life and 81,94% in non-life is represented by foreign capital. In absolute terms there are 20 life and 23 non-life insurance companies with foreign capital authorised in Poland. From my personal perspective foreign investments stimulated market development and competition in the market as well as providing necessary stimulus for growth to our local companies. There are substantial differences between local markets in the EU. The Polish one has been developing in its own way and foreign companies have been contributing to its development rather than changing it in any particular way. From the consumers’ as well as supervisory perspective there are challenges which relate mainly to cross-border business.

The claims ratio for mandatory third party liability insurance has been challenging for a number of CEE insurance markets. Is this an issue in Poland and if so, how has the KNF reacted so far and what is the outlook for the years to come.
D.J.: Bearing in mind the adverse results in the compulsory motor insurance in the years 2014-2015 KNF decided to conduct a study of the adequacy of the premiums in motor insurance (MTPL and casco). In 2015 KNF presented its position highlighting to the insurance companies the need to take a series of measures ensuring that the calculation of insurance premiums is done correctly and that sales process must be improved. In relation to 6 insurance companies KNF initiated proceedings to impose a fine due to the determination of premiums in violation of the law, namely the premiums were insufficient to cover all anticipated obligations and costs arising from insurance contracts. In the first quarter of 2016 KNF again asked the undertakings to present the status of implementation of actions improving the adequacy of premiums and determine the date of bringing viability of these lines of business.

KNF activities are aimed at achieving the correct determination of the insurance premium at the level that covers the risks involved and the operating costs which in turn would improve the loss ratios and profitability in the motor insurance.

XPRIMM: There have been some debates in Romania about the introduction of a direct compensation scheme for MTPL insurances. Poland is often given as a positive example in this regard. Could you please explain how this systems works in Poland? How satisfied are you with the results so far?
D.J.: This system has been introduced in Poland on a voluntary basis as a market driven initiative. In this sense it is a very positive sign of cooperation among insurance companies in Poland. Still until now not all companies joined it.

The main identified advantages of the DCS are the acceleration of the loss adjustment process, the decrease of the loss adjustment costs because mutual settlements between insurance undertakings prevent them from inflating costs, the decrease in the number of fraudulent claims and improvement of the image of the insurers. Moreover policyholders also benefit from receiving adequate compensation, increasing the quality of customer service and the lack of necessity to determine the perpetrator. As a consequence the number of clients’ claims and lawsuits against insurers decreases.

The recent data show that more than 60% of clients determine the choice of insures on whether or not they offer DCS.

What are the main catastrophic risks that affect Poland and what is your proposal (or the markets’) for mitigating and/or transferring them?
D.J.: The main catastrophic risks affecting Poland have their source in forces of nature. The most common one and with potentially wides impact is flood risk. Other catastrophic risks concern man-made disasters such as transportation or construction accidents.

The main risk mitigation technique is outward reinsurance, mainly non-proportional one. In cases of significant single events polish companies use facultative reinsurance.

Insurance companies in Poland have been rumoured to be interested in further expanding their presence within the CEE region. What are your comments on this?
D.J.: The Polish insurance companies have been operating within the CEE region for some time now. At first this has been done through branches. Similarly to some of the foreign companies operating in Poland, in time, with growing size of operations these companies decided to incorporate their branches into companies under the local law and subject to local supervision. In addition to that our companies do seek new investment opportunities. From our perspective we care about them doing so in a manner that does not exceed their financial capacities. We also cooperate closely with our partners from other EU countries to make sure that their operations are up to their expectations and in line with local market specificities.

Financial education is a key issue in many markets. What efforts has KNF made in this direction?
D.J.: In order to fulfil its statutory task which include popularising knowledge of the financial markets, since 2009 KNF has been developing its Educational Centre for Market Participants (called CEDUR), under which it organises trainings and publishes many educational materials. Last year KNF held more than 100 seminars and training workshops, which were addressed mainly to the representatives of regulated entities from all financial market sectors, representatives of the judiciary and law enforcement agencies, teachers of Basic Entrepreneurship and Economy in Practice as well as methodologists of these subjects at upper secondary school level. These meetings were attended by nearly 9 thousand participants. Referring to publishing activities, in 2015 eleven educational brochures were published under the imprint of the KNF including 24 financial literacy class scenarios and a “financial guidebook” for seniors. In 2015 KNF initiated a new programme called “Let’s talk about finance” dedicated to primary and secondary school pupils offering financial education workshop/lectures, publishing activities. We have also launched a the competition for the best short movie on financial markets.

How many companies have accessed your market on the FoS and/or FoE and what are the consequences of this from the consumer protection perspective?
D.J.: Being a Member of EU brings some challenges in this regard. Currently we have 640 companies operating under the freedom to provide services and 26 under the freedom of establishment. The presence of non-Polish insurance undertakings has an impact on the Polish insurance market, especially in terms of MTPL insurance. As a result a very strong pricing competition exists between domestic insurance companies and the non-Polish insurance companies. As a consequence the KNF receives a substantial number of complaints from customers mostly concerning problems with loss adjustment or delays in pay-outs. Very often customers are not even aware of the fact they conclude an insurance contract with the company not supervised by the KNF. This leads to many practical problems in case of any legal dispute. Additional question on the prudential side is a mismatch between the price of policies and risks arising from MTPL business.

At the same time I’m happy to take note of the fact that with the observed growth in gross written premium from FoS activity, recently in three cases the entities decided to transfer the insurance portfolio from the branch operating in Poland to domestic insurance company under direct supervision of the KNF.

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