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Looking ahead to rosy, but disruptive times

Insurance companies are enjoying prosperity not seen since before the recession and are gearing up for the technological disruption likely to be caused by the internet of things.

It took three years, but it has made it at last. The insurance market has recovered from the heavy impact of sectoral taxes – namely 10% levied on asset insurance and 15% on casco (voluntary vehicle insurance), respectively. According to data from the Hungarian National Bank (MNB), the figures for the first half of 2016 resemble the pre-financial crisis days with profits up by 20% compared to the year before. Revenues also soared, albeit at a slower pace. Life insurance-generated revenues fell somewhat, but the non-life segment showed a healthy 9% hike and the number of insurance contracts also grew by 4%.

Companies surveyed by the Budapest Business Journal confirmed the positive developments. Groupama reported dynamic growth, not only in the compulsory car liability segment, but also in the case of products concerning payment ability of debt installments. CIG Pannónia has recorded promising statistics in terms of unit-linked insurances, more specifically pension-focused savings.

“As several educational programs have been launched, public attention is increasingly turning to the importance of self-provision,” says Dr. Gabriella Kádár, CEO of CIG Pannónia Életbiztosító Nyrt. “The same growing awareness can be detected with regard to health insurance. And the reputation of the entire industry is bound to improve as the new requirements of the ethical life insurance concept, effective from next year, will make the cost structure of products even more transparent.”

Market leader Allianz has recorded healthy business development and it has every reason to gaze into a rosy future. “Demand for digital products is constantly ballooning, therefore innovation must continue,” Tamás Szőke, director for product and portfolio management of Allianz Hungária Zrt. noted. “There are huge reserves in the home insurance market and the SME sector, as both are under-insured, but agriculture has a lot of room for expansion as well.”

Driverless faults

Autonomous vehicles (AVs) will shape not only traffic, but also the realm of insurance. UNION predicts the legal environment will differ across jurisdictions, and it is betting on witnessing a decade-long process till an EU-wide regulation is implemented, which is a prerequisite for insurers to react. “We are not expecting any legislative changes in the near future, but, in terms of vehicle use and incurred damages, we are monitoring the application of existing systems such as lane departure warning systems or pedestrian detection solutions meant to avoid accidents,” a statement from Groupama says. It also believes that insurance premiums should cost less for AVs, and companies should react by introducing special bonuses soon. Although the number of accidents will surely drop, due to the connectivity between smart vehicles, Allianz expects accident claims to become more complicated. “The current system, however, will probably not be dismissed completely in the short run,” says Tamás Szőke, director for product and portfolio management of Allianz Hungária Zrt. “Car liability insurance, for instance, should continue to exist since the fundamental purpose of this form of insurance is protection and compensation of those concerned by the damage, which will be needed in the future just as much. Compensation is expected to be arranged by the insurance company that will mediate with and consult those suffering and causing the damage as well as the manufacturer.”

Satisfaction surveys from the conveyor belt

The industry was among the first to realize the importance of measuring and improving the customer experience, and to that end serious efforts are being undertaken. Common practice shows that customers expect damage settlement to go in the smoothest possible way. One of the key goals of Allianz is to make its relevant service quicker and more effective. “This is part of the overall digitalization program of customer relations, which started in 2015. This year our web pages are being developed further for the sake of optimization, responsiveness and consolidation,” Szőke added.

Electronic support is deemed as a strategic asset by UNION Biztosító as well in the race for the hearts and minds of users. A newly introduced chat function has quickly become popular. “Customer satisfaction is measured in affiliates as well as on our online platforms,” Viktor Maják, director of communications at UNION said. “In September, a survey conducted in our customer relations offices concluded that up to 99.1% of respondents rated the service excellent. Another poll concerned our online casco damage settlement service, in which case we are proud to report that 94% of our clients claimed they would recommend the service to their relatives and friends.”

Customer satisfaction is to be taken to the next level at Groupama with the help of a complex company survey that aims to address not only the needs of customers concerned by damage settlement, but other key processes at the firm too. Accordingly, interactions that influence the corporate image, such as how contracts are concluded or conventional call services, will also be scrutinized with the purpose of optimization.

Online insurance on a guaranteed growth track is the market leader in the online insurance market and it doesnʼt take an astrologist to predict that this segment can look forward to especially busy times. As confirmed by Netrisk CEO László Sebestyén, habits are changing and the insurance market has been adapting to the process. “The online insurance market is dominated by two main products: compulsory car liability and travel. In both cases customers are becoming ever more conscious in their choices and the process is bound to intensify,” he told the Budapest Business Journal. The world wide web was used to explore and compare car insurance premiums at first, then travel appeared on the horizon. It was a natural evolution, since people increasingly organize their own trips. “Netrisk initiated a product development concept three years ago in which aim the was to serve personalized needs more by keeping the premium level, but extending the scope of services,” Sebestyén said. This is how it became routine to find offers specifically designed for trips by plane or car, focusing on sightseeing or skiing. Now there is even a pilgrimage template out there to choose. “This new approach allows customers to pick what they actually need, and nothing more,” the CEO added. Some areas, such as home insurance still seem to leave customers looking for old fashioned help. They collect information on the internet, but then tend to seek advice at bricks-and-mortar affiliates before entering into an agreement. Netrisk wants to change that perception of uncertainty. “Just because it is a more complex product, people should be able to make up their mind without having to leave their desk,” Sebestyén explained. “Since a call center has been set up by Netrisk, users increasingly go for completing their transactions online as they have an expert they can rely on immediately on the other end of the line.” Relations with conventional insurance companies are excellent, Netrisk says, since they donʼt mind that it is an online player driving customers into their arms. “Online growth is guaranteed as this is where everything is headed,” Sebestyén concluded.

Embracing the smart revolution

The expanding internet of things (IoT) market will not leaving insurance companies unaffected, either. According to a recent study by French multinational management consulting corporation Capgemini, 29.5 billion products with a web-based operation will have been sold and the consumer penetration of smart home appliances and wearables should hit the 40-50% mark on average by 2020. This also means that insurance companies will have a lot more data to work from.

“Big Data helps us get to know the needs of our customers better and develop more customized services and products,” Szőke said. Groupama is expecting to be able to calculate person-specific premiums by analyzing more detailed statistics. According to its statement, the home and the car segments as well as agriculture are all about to experience huge growth. The latest technology-bound products include Allianzʼs special liability insurance for drone operators, but the home insurance segment looks equally lucrative for development. “It wonʼt be long until your smartphone alerts you in the event of a home insurance incident and seeks help by informing the hotline automatically,” Szőke added.