The development of life insurance market: problems and prospects

Evolution of the life insurance sector in Poland in1990 – 2005
- theses -

1990 – 1995 – Development of the free insurance market in Poland

- main market player – state-owned company – PZU (December 1991: separation of PZU Life from PZU General Insurance Company; domination of the group life policies – simple products covering a variety of risks with a very low benefits; no life insurance awareness)
- the growth of the number of life insurance companies (the first licence for a foreign insurer – AIG – October 1990; CU obtains an operating licence in September 1991; the share of foreign capital in primary capital of insurance companies operating in Poland grow rapidly)
- the successful distribution model – the “army” of tied agents (intensive recruitment of the sales force; building the image of a new profession – an insurance agent; growing demand for professional trainings including sales skills and techniques, negotiations),
- a new financial brands build their awareness (a lot of brand image campaigns build trust in life insurance)
- unit – linked versus endowment – a new product standards on the life insurance market (CU introduces the flexible and transparent product – “Flexible Protection Plan”)
- liberal supervisory body (first regulatory: The Minister of Finance),
- systematic growth of gross written premium

1995 – 1999 – Life insurance boom

- PZU – decrease of market share
- a few more life insurance licence obtained
- lack of innovation in product development (a new products launched into the market are very similar to the competitors portfolio)
- the pension reform (1999)
 famous financial brands start advertising prosperous life on retirement,
 the insurers recruit a great number of representatives/ distributors,
 huge advertising campaign budget versus huge distribution channel,
 positive impact on life insurance industry

- “golden age” for life insurance agents
- dynamic growth of number of policies and gross written premium,
- more restrictive regulator (new supervisory body – the Insurance Supervisory Office (PUNU)

2000 – 2005 – Mature development of the life insurance market

- stabilisation and moderate growth
- policy surrender problems
- total number of insurance companies operating on the market quite stable (no major changes)
- changes in the taxation system
 capital gained tax (2001)
 more important role of bancassurance
- crisis of insurance agent profession
- adaptation of Polish insurance law to the EU law
- introduction of Individual Pension Accounts (IKE) (the government programme to stimulate individual savings; IKE legislation failure – it did not fulfilled the expectations of its proponents in terms of accounts purchased )
- product competition based on additional riders and packaging
- common supervisory body for life insurance and pension companies (KNUiFE, Insurance and Pension Funds Supervision Commission - Polish regulator).

Future prospects:

- further development of the pension system (pay – outs from the second pillar; modification of the Individual Pension Accounts legislation – respective changes to the law suggested by insurance industry include immediate tax advantages)
- health system reform (private health insurance)
- changes to the distribution strategy (complex financial solutions instead of just “selling products”; direct sales and e-commerce for a simple products)