Report on Business Activities
Non-life Insurance
Non-life insurance premium billing came to CZK 20.1 billion, up by CZK 356 million (1.8%) on the previous year. The lion’s share of this can be attributed to Česká pojišťovna’s indirect business – inward reinsurance. Direct premiums written did not stray from the previous year’s level. A crucial factor in the development of premiums written is the motor insurance situation. In 2015, Česká pojišťovna successfully halted the decline in premiums written in this segment. Trends in premiums written in other classes can also be described as stable. The combined ratio as at 31 December 2015 was 78.5%.
The claims frequency was reassuring in 2015. For the second year running, there were no catastrophic events to deal with. Even so, under pressure from the insurance market and legislative changes, there was a modest hike in the amount of claims paid. Claims costs were CZK 0.3 billion higher than in 2014. Agricultural and personal lines insurance was particularly encouraging in this respect, whereas coverage of large business risks was exposed to several major claims.
Business Risk Insurance
In the first half of 2015, premiums written in business risk insurance were CZK 76 million (1.4%) higher than in 2014. Particular growth was recorded in engineering insurance. Premiums written in agricultural insurance declined by a slight 2.3%. Claims costs shot up (by 7.5% compared to the previous year) in the face of several major large-risk claims. Conversely, it was an extremely good year for agricultural insurance, where costs were 39% lower than in 2014.
Česká pojišťovna started offering another two new products. The new directors and officers (D&O) liability insurance, covering a broad range of risks, was successfully marketed and has proven particularly popular among smaller businesses requiring a lower limit of indemnity. The new contractors’/erection all risks (CAR/EAR) insurance, designed for larger-scale construction and assembly projects, primarily targets corporate customers.
The SME product was updated and, parallel to this, a new online charge computer was devised.
During the first half of the year, work continued on processes to maintain sound profitability in all customer segments of business insurance. Unprofitable customer segments are systematically addressed, and expired offers and work with sales discounts are analysed. Numerous adjustments streamlining the negotiation process as much as possible were made to guarantee customer satisfaction with insurance contracting.
In agricultural insurance, the Company has pressed ahead with the implementation of a new mobile application to deal with crop claims, which accompanies the adjuster throughout the loss adjustment process with a view to making settlements faster and more transparent. Rules on the certification of premium payments were revised in response to a change in principles for the granting of agricultural insurance support via PGRLF (the Support and Guarantee Farming and Forestry Fund). In the latter half of the year, winter freezing injury insurance was revamped and the coverage available for fruit grown under netting was expanded. A raft of measures was taken to enhance profitability in crop and livestock insurance.
Non-life Personal Lines
This class of insurance was stable in 2015. The main reason for the 1.5% dip in premiums written was the state of play in travel insurance. Claims incurred were 10.4% down on 2014, making 2015 a very good year from this perspective.
In 2015, we zoomed in on promoting sales of property insurance with assistance services, relying in particular on a third-quarter high-profile online campaign intended to explain the usefulness of such assistance services and the unique cover they offered within the framework of Česká pojišťovna’s property insurance.
In 2015, there were no negative or unforeseen impacts resulting in serious repercussions for liability insurance. We gained ground in boosting the profitability of professional indemnity insurance.
The security situation in most European countries and other destinations precipitated a general setback in sales of commercial travel insurance in 2015. This negative effect was particularly pronounced among travel agencies’ clients. As part of a summer marketing special for all distribution channels, Česká pojišťovna offered an empty home rider in the price of short-term travel insurance. This move fuelled a surge in interest not only among online customers, but also, for example, among those taking out travel insurance via a commercial adviser.
Motor Insurance
In motor insurance, we successfully stemmed the downward flow in premiums written (reporting a dip by just 0.4%) combined with a 1.1% uptick in the number of policies taken out in 2015. For all that, there was a 4.2% hike in claims incurred. Competitive factors and legislative changes have come to the fore here.
The first half of 2015 was influenced by legislative changes, especially the last chance to resolve vehicles “in limbo” (the incomplete re-registration of vehicles, i.e. vehicles that were deregistered by the seller but not registered in the name of the new owner) before they were struck off the registers (i.e. became administratively non-existent and hence illegal to use). In the second half of 2015, Česká pojišťovna pursued simplicity, promptness and better-quality services in its vehicle insurance. Hugo, our new contracting tool, makes insurance contracting faster and more transparent. We also made our MTPL range more attractive and simpler, and embellished vehicle insurance with new superior assistance elements.
Motor insurance rates continue to reflect the fallout from the introduction of the new Civil Code, which has seen insurance companies record higher average health indemnity. This trend has gradually been echoed in premium rates across the market.
Motor Third Party Liability Insurance
In 2015, total MTPL premiums written remained at virtually the same level as the previous year (a 0.1% decline). This is another insurance segment in which Česká pojišťovna remains the largest insurer, with a share of 23.1%.6 The drop in premiums written can be attributed in particular to the loss in leasing insurance. Retail insurance premium billing went up by 1.7% as the Company continues to firm up its market position. Although claims costs climbed by 2.5%, the profitability of this insurance was maintained at an acceptable level given how intensely competitive this area is.
Collision Insurance
The motor collision insurance market was consistent with the MTPL market. Premiums written fell year on year by 0.8%. Aside from the leasing insurance loss, personal lines premium billing was up by 4.7%. Results here have been built on Česká pojišťovna’s commercial services and the market revival in this class of insurance. Claims incurred developed along unfavourable lines, rising 6.0% year on year and consequently trimming the profitability of this insurance.
Innovation and Future Developments
We will continue our progressive innovation of all products, reflecting customer needs and requirements, and the establishment of settlement rules in response to the practices of the courts and other legislative changes. Now that D&O insurance has become a fixture in the range of products available for businesses, the contracting process will be automated in 2016 to speed up the rate at which we can make offers.
In the highly competitive vehicle insurance market, Česká pojišťovna is aiming to keep enhancing the quality of the products and services on offer, thereby guaranteeing the satisfaction of customers and business partners alike. Deployment of our new contracting tool across all ČP distribution points will be completed in 2016, making it faster and easier to take out motor insurance.
Life Insurance
Life Insurance Product Portfolio in 2015
In its regular-premium life insurance product range, Česká pojišťovna continued to sell insurance built around the unique circumstances and needs of its customers. The flagship life insurance product remained Můj život, which continued to be used as a financial instrument convenient to insure the whole family. We placed a particular emphasis on the quality coverage of the short- and long-term impacts that illness and injuries have on the lives of our customers’ families. Under insurance contracts taken out in 2015, our customers use Můj život regular premiums to cover risks in more than 75% of cases.
In September 2015, we introduced the possibility – preferentially for the SME distribution channel – of providing Můj život insurance with acquisition commission released on an ongoing basis throughout the period of coverage.
In the realm of group insurance, we prepared new SME employee risk insurance, which is easy to take out using preconfigured packages covering death, the duration of essential treatment and permanent disability.
In 2015, we concentrated on increasing product profitability, especially in personal accident insurance. In the contract acceptance process, we introduced customer risk assessments encompassing available information, the customer’s needs and requirements, and the contract type.
Another area we focused on in 2015 was consumer protection. We made life insurance clearer and easier to understand for our customers by revising the contracting forms and adding information to the Česká pojišťovna website that life insurance customers are routinely interested in.
Financial Indicators
Despite a 9% year-on-year decrease, total premiums written under new regular-premium life insurance contracts still amounted to CZK 8.7 billion. Single-premium products generated CZK 0.9 billion in premiums written. On aggregate, our regular-premium life insurance products were purchased by 111,000 customers in 2015.
Claims Paid
In 2015, life insurance claims paid fell by 14% from the previous year’s figure to a total of CZK 12.4 billion. This contraction can be attributed to the lower levels of regular withdrawals. The total number of claims settled was 383,000.
As in previous years, the greatest number of paid claims was registered in the “insurance on death or survival” class. In terms of monetary volume, most funds (CZK 7.3 billion) were released in the form of endowments.
Outlook
Relentlessly increasing competition and falling returns throughout the financial market will continue to steer the emphasis towards honing offers to insure risks associated with loss of income and the need for extraordinary outgoings in case of personal accident or disease, entailing broader product features in tandem with downward pricing pressure.
In 2016, Česká pojišťovna a.s. will continue to implement requirements stemming from the Solvency II regulatory regime. In life and personal accident insurance, we will mainly be seeking to capitalise on output from the new internal capital model for the testing of product profitability and approvals and, generally, the monitoring of the risk associated with the life and personal accident portfolio. The new regulatory regime will also alter the definitions of various lines of insurance compared to the provisions of the Insurance Act currently in force. Although delays in the legislative process in the Czech Republic mean that Solvency II has not actually been effective since 1 January 2016, Česká pojišťovna a.s. will still be applying the regulatory regime’s principles in full during 2016.
Česká pojišťovna a.s. will also ready itself for the enactment of a new directive on insurance distribution and the implementing measures thereof, and for changes deriving from the regulation on the communication of key information.
We also assume greater attention will be paid by the supervisory authority to consumer protection, due professional care and the corresponding production of internal regulations.
Sales of Insurance
Internal Distribution Channels
Internal distribution channels consist of a network of captive insurance agents and staff from the Česká pojišťovna branch network. In 2015, all internal distribution channels built on activities facilitating their long-term stable operation on the financial services market, where growth trends are slackening. The spotlight, then, remains trained on quality in the way products and services are offered to customers, with a view to maintaining a high standard of customer service and guaranteeing customer satisfaction with services rendered, while keeping track of the latest developments in insurance regulation.
In the second half of 2015, the project of further improvements in the efficiency of internal distribution saw the completion of restructuring in this area, commenced in 2013, when the branch network was placed under single-source regional management and the number of management levels was reduced. This made it possible to boost regional competences, with the creation of 14 regions essentially matching the distribution of the Czech Republic’s administrative regions. On the basis of this change, communication could be speeded up in both directions between management and agents. More importantly, this was an opportunity to further consolidate cooperation between individual channels intended for internal distribution at various sites. In addition, the revamp supported a long-term project significantly scaling down our administrative office space in favour of points of sale in those locations where our customers are concentrated.
In mid-2015, the flexibility of the internal distribution network was put to the test by Hugo, our modern new motor insurance contracting tool harnessing the latest technological developments for the convenience of agents and customer-friendly output.
This was followed, in the second half of 2015, by another innovation – the use of e-signatures via signature pads. This new technology will enable us to negotiate and finalise insurance contracts in 2016 without having to print reams of paper at more than 600 Česká pojišťovna points of sale, hence making our business a lot less burdensome on the environment.
Specific Distribution Channels
External Retail Partners – Focused on Personal Lines
In terms of product sales via external companies, 2015 was a year brimming with interesting, upbeat activities. For example, we were busier in non-life insurance contracting, especially with motor insurance.
Our sales success was fuelled by new underwriting limits, broader assistance coverage and a new pricing policy.
Our main activity, however, centred on setting up a process to assess the risks posed by life insurance contracts. These measures, which we believe are crucial, yielded stable and profitable new business.
In our relations with external partners, next year will be geared towards intensive preparations for the launch of Hugo, the new non-life insurance contracting tool.
Our focus in life insurance sales will be on the new children’s insurance, due for launch on 1 April 2016.
Česká pošta (Czech Post)
Ever since Česká pojišťovna and the state enterprise Czech Post teamed up back in 2001, their cooperation has concentrated on a range of basic retail insurance products. Over the past 14 years, the scope of insurance services available has been developed with considerable momentum to the extent that, today, a comprehensive portfolio of life and non-life insurance products, including a full-blown service offered to the entire Česká pojišťovna customer base, is offered at specialised branches of Česká pošta. The business model relies on interaction between certified Česká pošta staff and captive insurance agents in the fields of actual acquisition and direct sales support.
Business activities by the postal network’s acquisition agents targeted the range of motor insurance products in 2015 – the structure and intensity of sales support provided by Česká pojišťovna’s dedicated teams was adapted to this trend. Parallel to this, work continued on building the capacity of the insurance service range – Česká pošta employees were certified and further post offices were hooked up to Česká pojišťovna’s application systems.
As at 31 December 2015, Česká pošta – as a distribution channel – accounted for an insurance portfolio worth CZK 690 million, up CZK 32 million on the previous year. The portfolio structure includes regular-premium life insurance contracts (74%), motor insurance contracts (14%) and non-life personal lines insurance (12%). In 2015, the aggregate volume of non-life insurance contracting was CZK 91 million, while new regular-premium life insurance amounted to CZK 73 million.
In 2016, sales operations will seek a further increase in the share of motor insurance products in the portfolio structure and a rise in the volume of new business, along with other non-life personal lines insurance products. Further development of the network of specialised Česká pošta branches, including the attendant expansion in the skill-set of post office workers certified to sell insurance products, will be crucial for the attainment of the sales results targeted.
6 Czech Insurance Association. Statistické údaje dle metodiky ČAP 1–12/2015 [online]. ČAP ©2014 [accessed 2016-03-01]. Available from: http://cap.cz/images/statisticke-udaje/vyvoj-pojisteno-trhu/STAT-2015Q4-CAP-CZ-2016-01-26-WEB.pdf