Slack interest in property insurance and bustle on the life insurance market
Kalin Dimitrov, www.insurance.bg
A market analysis made by the specialized information website WWW.INSURANCE.BG shows that Bulgarian general insurance companies’ premium income for the first nine months of the current year amounts to BGN 647.939.000. These results indicate a growth by 31.9% in comparison with the first nine months of 2004 and the amount is only BGN 86.000.000 less than the income accrued for the whole year 2004. Provided that steady pace of development of the market is maintained until the end of the year, the expectations are that incomes will reach ca BGN 950.000.000 – 1.000.000.000. The results, however, are largely dependent on the forthcoming campaign for sale of the mandatory Motor Third Party Liability.
Traditionally, the greatest share of insurance companies’ income is formed by the sale of auto insurance policies (Motor Third Party Liability, ‘Green Card’ and Autokasko) – about 63.56 % of the total income. Undoubtedly, Autokasko is the best-selling insurance policy, its income constituting 39.94 % of the total income. The mandatory Motor Third Party Liability ranks second, by income of 18.53 % and third comes the Fire and Natural Disasters Insurance with 16.77 %.
That year Autokasko has recorded an income growth of 37.95 % in comparison with year 2004 while Motor Third Party Liability – 63.76%. The growth in the first case is due to increased number insured motorcars and also to the fact that insured motorcars are now newer and more expensive. As far as the mandatory insurance is concerned, its income growth has been the result of higher policies’ prices. One should, though, take into consideration the fact that this year there is an increase in the number of insured cars in comparison with previous years. Different sources give different information as to the number of people that have signed Motor Third Party Liability but it surely does not exceed 60 % and thus still remains far below the European norms and insurance practice as regards this particular insurance. That was the reason why the European Commission laid special stress to the low sale rates of the mandatory insurance in its report. That resulted in a timely response by the state administration which now, for the first time since many years, has appealed to the insurers for mutual efforts in solving the problem. However we can only guess as to the result of that cooperation.
The analysis of INSURANCE.BG shows also that premium income from Fire and Natural Disasters Insurance and Damage of Private Property Insurance is equal to 20.66 % of the total income in the insurance business.
The continuous torrential rains that summer and the subsequent state of emergency declared in many regions lead to discussions that the citizens have finally grown to maturity when it comes to insurance of private property. A subsequent survey carried out by INSURANCE.BG showed that there has been only a slight increase in the demand and an insignificant increase in sales of that insurance service. After a period of heavy rains one could see a few people, worried about their property waiting outside the insurance companies’ offices. Though, not everyone that has shown any interest has later bought a policy. Therefore, the number of insured still remains far too low. These facts are proved by the figures as at September 30th this year. Income from the Fire and Natural Disasters Insurance amount to BGN 108.648.000, the amount being BGN 12.576.000 or 13.09 % greater that the amount from the same period of the previous year.
As far as the Damage of Private Property Insurance is concerned, there is a surprising decrease in incomes - by ca BGN 4.000.000 as compared with the same period of the previous year. According to specialists, the decrease is due to the lower rates of corporative clients’ insured property.
There is also an alarming decrease in the income from Freight and Security Insurance policies. With regard to all other types of insurance policies the insurance companies record income growth and it is promising that income is accrued now by one very interesting but not popular and until recently not profitable insurance product, namely the Legal Expenditure Insurance. It is only Interamerican Bulgaria that offers that service and it has attained only moderate success.
As at September 30th DZI – General Insurance remains the leader amongst the insurance companies. The company’s income amount to BGN 130.388.000 or 20.12% market share. As compared with the same period of the previous year the company has recorded growth of 74.97 %. With regard to premium income it ranked third then, while that year it has taken the lead. Company’s success is mainly due to management schemes that have succeeded to increase the sale of almost all types of insurance policies, the most prominent growth recorded with the Kasko insurance policy – 163%.
Bulstrad ranks second in premium income rates, its income amounting to BGN 110.222.000 and its market share being equal to 17.01 %. The company is a leader in the sale of ‘Green Card’ Insurance Policy, Aircraft Insurance, Freight Insurance and General Public Liability.
As compared with the previous year the company has recorded growth of 36.47 %.
By an income of BGN 100.475.000 in and market share of 15.51 % Allianz Bulgaria ranks third. Company’s income growth in comparison to the same period of the previous year is 29 %.
Except the successful performance of the leaders in the business, there are also several other companies that deserve admiration by virtue of their significant growth in income as compared with previous periods. These are Insurance Shareholders Company ‘Armeetz’, Insurance Shareholders Company ‘Victoria’, Insurance Shareholders Company ‘Euro Ins’ and Insurance Company ‘Levski Spartak’.
Growth in sales and income have been recorded by all general insurance companies with the exception of two, one of which has been revoked its license to carry out insurance activities on the territory of Bulgaria by the Financial Supervision Commission. Another interesting fact from the first quarter of that year is the fact that the most recently registered company on the market ‘DSK Garantzia’ has begun to sale its policies.
Life insurance companies hope that this year will be the most successful since the beginning of the 21st century.
The survey of the market carried out by INSURANCE.BG shows also that insurance companies’ accrued premium income as at September 30th 2005 amounts to BGN 93.424.000. Compared to the same period of the previous year income has increased by 51.64 %. The first indications that this year will be successful for the insurance business were notable in April when the results from the past quarter were calculated. At a more in-depth analysis of the development of the market one can clearly see that yet in the beginning of June our insurance companies had achieved results that were reported the previous year for a period of nine months. At the end of September this year income is only by 7.000.000-8.000.000 lower than the total income for year 2004. If life insurance companies maintain that pace of development, at the end of December their income should amount to minimum BNG 125.000.000. Last years’ figures show, however, that insurance ‘richest harvest’ is reaped at the end of the year and not in the summer.
That gives reason to INSURANCE.BG to draw the conclusion that the forth quarter of the year will be the most successful for the insurance business and the total income at the end of the year will exceed BGN 140.000.000. During the last five years’ period life insurers have accrued more than BGN 100.000.000 in premiums each year – in the previous year – a bit more than 101.000.000 and in 2002 – 148.743.000. The positive results three years ago have been, however, almost undone by the tax avoidance schemes used by insured persons. So, the BGN 140.000.000 expected will reach record high.
Such optimistic forecasts are further grounded in the fact that under the terms of the Bulgarian legislation expenditure on life insurance policies can be deducted from the taxable income. It is only that so many people remember that opportunity only at the end of the year.
It is promising that life insurance wins ever bigger popularity amongst the population. The biggest problem, however, remains the low purchasing capacity of most people in the country.
Amongst the most popular insurance policies (judging by the premiums collected) rank the Life Insurance and Annuity. Those incomes constitute ca 70.74 % of companies’ total income. Second comes the Additional Insurance whose income amounts to BGN 7.683.000 or 8.22 % of companies’ total income. Third, being only BGN 4000 less, ranks one of the most popular insurance policies, namely ‘Accident’. Its incomes amount to BGN 7.679.000 and it is obligatory to mention that compared with the previous year income rate has increased by 73 %.
Analyzing the results from the last nine months one can see that life insurance connected with an investment fund becomes more and more popular even though it is offered by only 3-4 companies.
The lowest income and therefore the lowest interest have recorded the Wedding and Children Insurance – 3.19 % of the total income and the Permanent Health Insurance – 1.98 % of the total income. During that quarter of the year too, companies have not earned any income from the sale of the ‘Purchase of Capital’ insurance policy.
State Insurance Institute – DZI Plc maintains the lead in gross premium income. The premiums collected by the company as at September 30th 2005 amount to BGN 28.670.000, constituting 30.69 % of the total income. The ex-state insurer shows very good results. Compared with the same period of the previous year, the company has recorded growth of 110 %. Another interesting fact is that company’s income for the last nine months of this year is by 250 000 higher than the total income for the whole 2004.
The DZI is also a leading company in providing four out of the six best-selling insurance services on the Bulgarian market, namely Life Insurance with Investment Element, Permanent Health Insurance, Additional Insurance and Personal Accident insurance policy.
Leader in terms of the other two types of insurance – Life insurance and Annuity and Wedding and Children Insurance is Allianz Bulgaria Life. The Bulgarian–German company ranks second amongst the life insurers with regard to premium income – BGN 24.462.000 and 26.18 % market share and growth by 36 % as compared with the previous year.
Orel Life is the third-ranked insurance company. The company has income of BGN 9.242.000 or 9.88 % market share.
Except from the excellent results of the lead companies, BULSTRAD Life also makes a very good performance. The company ranks fifth as by premium income (BGN 6.056.000) and by market share - ca 6.48 %. Its income growth, though, gets more impressive if we deduct income formed by its joint business with DSK Bank.
DSK - Garantzia made also a good start at the beginning of September 2004. As at September 30th the same year it had recorded income amounting to BGN 363.905, and now its revenues amount BGN 4.795.000 which is equal to a market share of 5.13 % and ranks the company seventh on the market. It is probable that the company gets among the leading six companies at the end of the year.
All the rest of the life insurance companies have made successful performance. All but one have recorded growth in income and sale at the end of these nine months.
