Poland’s life insurance market measured by gross written premium was estimated at PLN 15,898 million in the first three quarters of 2019, meaning that over the most recent 5 years it contracted on average by 5.6% per annum. At the same time, gross written premium in Q3 2019 (ytd) was 3.1% lower than in the corresponding period of the previous year. This resulted principally from the evolution in the single premium business in investment products, while the gross written premium in products with a periodic premium increased slightly.
Source: KNF’s Quarterly Bulletin. Rynek ubezpieczeń [Insurance Market] 3/2019, Rynek ubezpieczeń [Insurance market] 3/2019, Rynek ubezpieczeń 3/2018, Rynek ubezpieczeń 3/2017, Rynek ubezpieczeń 3/2016, Rynek ubezpieczeń 3/2015
The changes in the level and the growth rate of the life insurance market premium in recent years have been stimulated mostly by single premiums in investment products. It is worth noting that the premium contraction for the overall market year on year after the first three quarters of 2019 pertained to single premiums (down PLN 699 million, or 17.0% y/y, compared to a decline of 31.7% y/y recorded in the previous year). The single premium compound average growth rate since 2014 was – 17.4%. The changes in circumstances on the capital market and in the legal environment are considered to be the underlying causes for the gross written premium on single premium business to fall in a trend over several years. Initially, the record low interest rates contributed to the decline in the yields offered by term deposits packaged as insurance products, thereby leading to heightened interest in other investment products. Additionally, a tax was introduced as of 1 January 2015 on short-term endowment insurance offering a fixed rate of return or a return based on indices; this also contributed to reducing client interest in such products and ultimately to their retraction, especially the first ones, from the offer of insurance undertakings. In subsequent years the regulatory authority’s guidelines, including guidelines regarding the level of fees incurred by clients of unit-linked products and EU directives regulating the market for these types of products and their distribution led to insurance undertakings constricting their offering of these types of products, especially in cooperation with banks. The first 3 quarters of 2018 were characterized by a rapid dip in the level of written single premium to the lowest figures in many years, followed by its stabilization at PLN 1.1-1.2 billion in each of the subsequent quarters.
|Gross written premium||1 January - 30 September 2018||1 January – 30 September 2019|
|PZU Życie||Market||Market net of PZU Życie||PZU Życie||Market||Market net of PZU Życie|
The outcome of this market evolution was the expanding significance of periodic premium that constitutes PZU Życie’s competitive edge on the market. In the first three quarters of 2019, periodic premium was 1.5% higher compared to the same period in 2018, with a cumulative average growth rate of 0.3% for the last 5 years. Despite the decline in periodic premium in unit-linked life insurance (by PLN 210 million y/y), the premium from protection products (in classes I and V) continues to trend upward (PLN +395 million y/y), mostly in individual insurance.
At the same time, market concentration measured by the periodic gross written premium remained high. The sequence of the largest market players did not change either, but their combined share, especially of the top four, expanded.
The total technical result generated by the life insurance companies in the first three quarters of 2019 was up PLN 135 million (5.6% y/y) to PLN 2,542 million. An increase of PLN 167 million (34.8%) transpired chiefly in the life insurance group (class I). This was caused by an increase in investment income in the portion allocated to this product group as well as growth in revenues, which more than offset the claims inflation and increase of costs associated with insurance activity.
|gross written premium vs. technical result||1 January - 30 September 2018||1 January – 30 September 2019|
|PZU Życie||Market||Market net of PZU Życie||PZU Życie||Market||Market net of PZU Życie|
|Gross written premium||6,197||16,409||10,212||6,351||15,898||9,548|
In this same period, life insurance companies generated a net result of PLN 2,061 million, representing a PLN 97 million (4.9%) increase y/y. This improved result was the effect of the technical result described above partly offset by a worse performance recorded on insurers’ free funds.
The total value of the investments made by life insurance undertakings at the end of Q3 2019 was PLN 39,918 million, signifying 0.7% growth compared to the end of 2018. In turn, the high level of funds redeemed accompanied by the decline in the level of client contributions to funds led to a lower net asset value of life insurance in which the policyholder bears the investment risk (down 3.3% to PLN 49,231 million).
PZU Życie’s activity
Within the PZU Group, PZU Życie operates on the Polish life insurance market. PZU Życie offers an extensive range of life insurance products, which for management purposes are reported and analyzed broken down into the following three segments: group and individually continued insurance, individual insurance and investment contracts.
During the first 3 quarters of 2019, PZU Życie wrote 39.9% of the gross written premium of all life insurance companies, signifying further growth on top of last year’s market share (+2.2 p.p.). The reason for the increase in PZU Życie’s share is the higher level of written single premium than a year earlier (both from protection insurance products and investment insurance products) with a decrease in the share of other market participants (in the unit-linked life insurance group).
At the same time, PZU Życie continued to be the clear leader in the periodic premium segment. In Q1-Q3 2019, it generated 45.9% of periodic premiums written by insurance companies, signifying a small decrease (by 0.1 p.p.) in the market share in this segment. The y/y increase in gross written premium at PZU Życie in this segment was 1.3%, while the other market players taken together posted a 1.7% growth rate (with a particularly high rate of growth recorded by TUnŻ WARTA SA). One of the major factors was the rapid growth in the health and individual protection insurance portfolio. PZU Życie now has more than 2.1 million this type of policies in its portfolio. PZU’s share in just the life insurance segment (class I) for periodic premiums at the end of Q3 2019 was 62.4% when measured by value (gross written premium) and 67.3% when measured by volume (the number of agreements in force). In turn, PZU Życie’s market share in terms of the method of entering into an agreement just in the life insurance segment (class I) was 66.5% for agreements executed in group form and 39.6% for individual agreements (measured by gross written premium).
Groups: Talanx - Warta, Europa, Open Life; VIG - Compensa, Vienna Life; Aviva - Aviva, Santander-Aviva
Source: KNF’s Quarterly Bulletin. Rynek ubezpieczeń [Insurance Market] 3/2019
PZU Życie’s technical result represented more than half the result earned by all life insurance companies. This evidences the high profitability these products enjoy. PZU Życie’s technical result margin on gross written premium was 1.6 times higher than the overall margin generated by other companies offering life insurance (21.0% versus 13.0%).
PZU Życie, as a popular and the largest insurer on the Polish market, continuously expands its product offering by adding new products or modifying existing ones to protect its clients at each stage of their lives. Changes in the product offering are intended to attract new clients and expand the insurance cover for those already in the portfolio, along with strengthening their loyalty and increasing their satisfaction level. Taking advantage of the unique synergy of competences within the PZU Group (insurer, medical operator, investment manager), the company is able to comprehensively take care of life, health and savings of its clients, providing them with the broadest possible support.
Concurrently, the changes in the offering take into account the changing requirements of the regulatory authority and the growing extent of statutory consumer protection. PZU Życie takes a customer-oriented approach by designing its offer and client service process so that the client feels fully cared for and satisfied. It should also be emphasized that the changes are made not only to the product itself but also entail the modernization and simplification of the way in which insurance is offered and sold and enable the client to take advantage of various contact channels to reach the insurance undertaking (e.g. in a branch, by phone, e-mail, client account, person providing technical insurance services in the workplace or through an insurance intermediary, whether tied or external).
Most significant product changes in 2019
Under group and health insurance, PZU Życie made the following major changes in 2019:
each of these types of insurance may be extended to cover medical services that include consultations with specialist physicians and rehabilitation;
Under the individually continued insurance, PZU Życie made the following changes:
In individual protection insurance products, PZU Życie implemented the following new life insurance products offered in PZU Branches and the Agency Network:
PZU Ochrona Każdego Dnia (PZU Protection Every Day) periodic life insurance; PZU Na Dobry Początek (PZU For a Good Start) endowment insurance. Annuity riders were also rolled out together with the basic agreement.
PZU Życie cooperated actively with 3 banks, including the PZU Group’s member banks, continuing the roll-out of a comprehensive offering using the banks’ distribution networks. The cooperation with Pekao and Alior Bank allows PZU Życie to gradually expand the offering and volume of sales of insurance products linked to bank products. In Q1 2019, life insurance for borrowers of Pekao cash loans was launched.
Within the framework of individual investment insurance, PZU Życie carried out new subscriptions for structured insurance Świat Zysków (World of Profits; 11 subscriptions throughout 2019). Various investment strategies that adapt to volatile market conditions were offered in the individual subscription tranches. The following changes were made by PZU Życie to its product offering in the bancassurance channel:
As regards its other initiatives, PZU Życie continuously strives to understand the needs of its clients better and build long-term relations with them. The Company wants to respond swiftly to changes in the environment through a sophisticated offer accompanied by clear and communicative messages by doing the following:
Factors, including threats and risks, that may affect the operations of the life insurance sector in 2020
The following constitute the major risk factors on the life insurance market in 2020: