Dr. Olga Ruf-Fiedler

Chief Underwriter Life, Vice-President
Winterthur Group
PhD math

Switzerland
Winterthur

General-Guisan str. 40
8401 Winterthur
Switzerland
Phone: + 41 52 261 2135

Life & Pensions Business in Central and Eastern Europe (CEE): A Comparative Analysis

 
Winterthur Group / Credit Suisse Life & Pensions has life insurance operations in about 20 countries all around the world, 4 of them are located in 4 CEE countries: Czech Republic, Poland, Hungary and Slovakia. In this presentation the author would like to share with the audience the experience of the Winterthur Group (WGR) in developing life business in CEE.

The presentation starts with an economic overview, insurance legislation of selected CEE countries and insurance growth perspectives. It discusses five stages of development of insurance markets in emerging countries. The tax incentives provided for life & pension products in each country are presented as well.

The main part of the presentation is devoted to the current status of mandatory and voluntary pension funds in 4 CEE countries, namely:
- what opportunities do pension reforms offer?
- who are the major players among the pension funds, and what are the assets under the management, and finally
- importance of International Asset Management Expertise (example Winterthur).

Hereby it is important to mention that Social Security Pension Systems (1st pillar) and Voluntary Pension Funds (3rd pillar) have been by now established in all 4 CEE countries (based on pay-as-you-go system), at latest in Slovakia just recently, in 2005. The Mandatory Pension Funds (2nd pillar) have also been introduced in these countries, with the exception of the Czech Republic which plans to start with the mandatory 2nd pillar provision in 2007-2010.

Next, the life insurance markets in these 4 CEE countries are discussed. In particular, for each of the countries, we show the fiscal treatment of savings life products, its influence on the premium development, and compare the distribution channels and product composition. Amongst the common features for all these markets is that the traditional life products are still dominating, whereby the unit linked (UL) products have started to take off (e.g. in Hungary and Poland the share of UL products has already exceeded 30%).  The high lapse rate is still a problem in these countries: in the 1st year the lapse rate for savings products varies between 18% and 30%, in the following 2-3 years – between 5% and 10%. In most cases, the customers follow the agents, who leave the company looking for new commission sources from another company. It is a real challenge to overcome this problem. Some ideas are discussed to improve the agent and customer retention, as well as the better understanding of the purchased insurance protection among the customers.

Finally, an overview of the development of the life group business in these 4 CEE countries is provided.  For each country, the major group products sold and regional particularities are discussed, whereby it appears that the key success factors for group risk covers in most countries are the flexibility in product package and price (e.g. tailor made offers), as well as good co-operation with brokers and size of the commission.

To conclude, it is emphasized that the development of the life & pensions insurance markets is mainly driven by tax and pensions legislation, whereby the life business develops slower that the pension business, and accident and health covers often serve as door openers for life insurance. The challenge for the further development of life insurance in CEE countries is to improve the quality of the products, of the distribution channels, and connected with this the customer retention.