“The insurance market in Macedonia is not sufficiently developed, as only a small package of standard insurance products is being sold, with domination of mandatory third-party car insurance that accounts for some 50% of the whole portfolio,” Skopje-based Sava Tabak Osiguruvanje’s Insurance and Reinsurance Director, Ilo Ristovski told SeeNews.
In Serbia, life insurance has the greatest potential for development as only 2.5% of the country's population of eight million has a policy for this type of insurance, Belgrade-based Grawe Osiguranje’s Managing Board President Christoph Czettl, and the Distribution Sales Network Director of Serbian majority state-owned insurer Dunav Osiguranje, Margerita Boskovic Ibrahimpasic, said.
Serbia’s undersized insurance sector is an upshot of a combination of the county’s low living standard, high inflation in recent years, and lack of insurance tradition.
“The decade-long inflation continues to undervalue the meaning of long-term insurance. The inflation has impoverished the insurers themselves, leaving stumbling blocks behind, because the products failed to make any financial sense,” Boskovic Ibrahimpasic said. Serbia's economy is still recovering from the hyperinflation it suffered during the violent breakup of former Yugoslavia and ensuing international economic sanctions in the 1990s.
NON-LIFE SEGMENT DOMINATES
The total gross premium income of the 12 Macedonian insurers was 6.4 billion denars ($152.6 million/103.9 million euro) in 2008, compared to 6.1 billion denars in 2007. Non-life insurance contributed 6.2 billion denars of total premium income last year. In the first half of 2009, total gross premium income of insurers in Macedonia was 2.99 billion denars, of which 2.86 billion denars came from non-life insurance. The country has a population of two million.
Car insurance accounted for the bulk of the premium income of Macedonia’s non-life insurance segment with 452,228 policies sold last year, followed by travel insurance (186,223 policies) and accidents (149,792 policies). The other most common types of insurance were property insurance, insurance against fire and natural disasters, other property insurance, general liability, casco, voluntary health, life and rental insurance.
In Serbia, the combined premium income of the 21 insurers operating in the country was 28.5 billion dinars ($450.3 million/307 million euro) at the end of the first half of 2009, NBS data showed. Their combined premium income was 52.2 billion dinars in 2008, up from 44.8 billion dinars a year earlier.
Property insurance led with 30.2% of total premium revenue in Serbia at the end of the first quarter this year, central bank data showed. Auto insurance came second with 27.6%, followed by general risk insurance, which accounted for 13.3%.
Life insurance premiums contributed 12.8% of total, while the remaining 16.1% was other non-life insurance premiums. Delta Generali Osiguranje controlled over half of the market of travel health insurance in the Balkan country last year, the company said in March, citing preliminary 2008 data. The company credited the growth of its market share to raised awareness about travel health insurance coverage in the former Yugoslav republic.
In Macedonia, UNIQA Group Austria board member Andreas Branstetter said earlier the global economic crisis would have no impact on the further development of Sigal Uniqa Macedonia in 2009, adding that the local insurance market has a great potential for growth.
Czettl said the crisis has had very little effect on Serbia’s insurance sector, if at all.
“But the segment hasn’t grown, so we may interpret this as one of the effects of the crisis,” Czettl said.
Ristovski said that the insurance sector can attract foreign investors to Macedonia where the average spending on insurance services by locals is still very low compared to the European average.
“The total premium income of the [Macedonian] market is some 100 million euro ($147 million) per year, or 50 euro per capita, which is an extremely small amount,” Ristovski said, adding that the average yearly insurance premium in developed European countries varies from 1,000 to 3,000 euro per capita.
According to Ristovski, Macedonia’s insurance market can expect an annual growth rate of seven to ten percent in the next 5-10 years, if the country’s economy improves. The growth would be also achieved through introduction of new, unconventional products, like liability insurance, business interruption insurance, as well as life-insurance, which currently accounts for some 2.7% of the whole portfolio, Ristovski explained.
The 12 insurance companies that operate in Macedonia are QBE, Vardar, Sava Tabak AD, Eurolink, Euroins Osiguruvanje AD, Sigal Uniqa, Insig, Sigma, Osiguritelna Polisa, Albsig, Croatia Osiguruvanje AD, and Grawe. Out of them only three are offering life-insurance: QBE, Grawe and Croatia Osiguruvanje-Zivot.
Foreign capital accounted for 75% of the combined share capital of all Macedonia's insurers at the end of 2007, up from 67% in 2006. There is no such data for 2008.
Fourteen of the 21 insurers, which operated in Serbia at the end of June, were majority foreign-owned.
Even though only 200,000 Serbs have life-insurance policies, 25% of Serbia's population is willing to take out one, if they had more information, Czettl said. In Serbia, life insurance premiums account for just about 11% of all premiums.
Boskovic Ibrahimpasic agreed that the Serbian government should step up its efforts to inform the public about the importance of insurance products and the opportunities they offer as the Balkan country lags behind members of the European Union which it is aspiring to join.
If we compare Serbia to developed countries, we should say that the ratio of life insurance versus non-life insurance should be about 45%-55% or 50%-50%, but Serbia is far from 45%, Czettl said.
In Serbia, Dunav Osiguranje led in terms of total premium income at the end of March with 4.1 billion dinars, followed by DDOR, owned by Italy’s Fondiaria, with 3.4 billion dinars, Delta Generali, part of Italian insurance group Generali, with 2.4 billion dinars, and Wiener RE, majority-owned by Austria's Wiener Stadtische, with 1.05 billion dinars.
In Macedonia, Vardar Osiguruvanje, part of Slovenia's Triglav Group is a leading non-life insurance carrier with a total premium income of 719.3 million denars in the first half of 2009, followed by Australian QBE Insurance Group’s Macedonian unit (468.2 million denars) and Sava Tabak (430 million denars). Vardar Osiguruvanje accounted for 25.2% of non-life insurance market at the end of June, followed by QBE Macedonia (16%) and Sava Tabak (15.1%). The remaining companies had market shares below 10% each. QBE also operates in life insurance segment, occupying 8.8% of that segment. Grawe is leader in the life insurance segment in Macedonia with a share of 55.7%, followed by Croatia Osiguruvanje-Zivot with a 35.5% share at the end of June.
Macedonia’s Sava Tabak, majority owned by Slovenian Sava Re, plans to keep its position among the three biggest insurance companies in Macedonia with a market share of 16%-21% in the next 5-10 years. The company is focused on introduction of new products, based on Slovenian experience and Macedonian market trends, Ristovski said.
In Macedonia, Croatia Osiguranje opened a non-life insurance company in May, in addition to its life insurance unit that operates since 2005. Also in May, Wiener Staedtische, part of the Vienna Insurance Group, bought Macedonian insurer Sigma.
In Serbia, a new market entrant this year was the Belgrade-based Societe Generale Osiguranje which was licensed at the end of July to offer primarily life, supplemental life, and annuity insurance.
Dunav Osiguranje said it plans to expand its operations across the entire territory of Bosnia and Herzegovina as well as to other countries in the region with an initial focus on corporate clients in major cities, Serbian broadcaster b92 reported last month. It plans to offer retail services at a later stage.
UNEMPLOYMENT, LOW INCOME WEIGH
In Macedonia, people are willing to insure against various risks but they opt for standard products, as they are not well aware of novelties in the industry.
“For three years running I've been paying for a home insurance policy. I decided on this, as I live on the 14th floor and I am afraid of fires. I can afford such a policy, as the insurance premium is some 4,000 denars per year," Ivan Mokrov, a Skopje-based journalist told SeeNews.
He also pays for an yearly car insurance policy but said he would not take out a life-insurance policy as he is not well aware of the benefits it offers.
“People are not much familiar with that, and the low standard of living should also be taken into account,” Mokrov said.
The average net salary in Macedonia was 19,763 denars ($471/321 euro) in July. The country's official unemployment rate was 32.7% in the first quarter of 2009.
The average monthly salary in Serbia is some 32,000 dinars, equivalent to some 350 euro, while the country’s unemployment rate of 15% is likely to remain unchanged throughout 2009, the country's Economy Minister Mladjan Dinkic has said.
To get a life insurance policy from Grawe one needs to pay an average premium of 500 euro per year.
“It is only reasonable that if households’ budget contracts, people want to save,” Czettl said.
Macedonia's Finance Ministry has served as a regulator of the local insurance market since 2002. The country has failed to set up a separate Insurance Supervision Agency although the Macedonian parliament approved the respective legislation in 2007.
Inadequate supervision, which means difficult identification and risk assessment, remains the main threat to the sector, the Macedonian National Bank said earlier.
In Serbia, Grawe Insurance has come up with a set of proposals to the Finance Ministry to bring in tax reliefs, aiming to boost the potential of the country’s insurance sector, Czettl said.
“Why a man, who takes out a life insurance policy, can not qualify for a write-off or a tax refund in the amount of a percentage of the paid premium? In France, for example, a person can qualify for a tax refund in the amount of 25% of his or her premium,” Czettl said.
According to him, state-sponsored reliefs may double the number of people who will buy a life insurance policy to 400,000 in the next five years.
“In Serbia, if a company pays pension insurance for its employees, it can save 3,500 dinars in taxes on a monthly basis. Why can we not apply the same, when it comes to life insurance? Such benefits do not yet exist in Serbia, but we are working towards changing that,” Czettl said.
(1 euro = 92.9257 Serbian dinars or 61.5924 Macedonian denars)
