Non-life insurance (PZU, LINK4 and TUW PZUW)

Market situation

Measured by gross written premium in the first three quarters of 2019, the non-life insurance market in Poland grew by a total of PLN 1,192 million (+4.0%) compared to the corresponding period of the previous year.

Gross written premium of non-life insurance undertakings in Poland (in PLN million)

Gross written premium in motor insurance was up 1.9% y/y (i.e by PLN 350 million) while the gross written premium generated in non-motor insurance was up by 7.2% y/y (or by PLN 842 million).

Within motor insurance, the gross written premium in motor TPL, which is the most sizable part of the non-life insurance market in Poland (PLN 12.2bn, or 39,1% of total non-life market in first three quarters of 2019) increased by 0.4% y/y (by PLN 44 million). Within that figure, a decline was visible in motor TPL in direct activity (down PLN 149 million, -1.3% y/y), which was offset by higher premiums from indirect activity (a growth of PLN 193 million, +27.1% y/y).

The gradually declining dynamics of premium growth in motor TPL resulted from intensified price movements among competitors after a period of above-average profitability of the portfolio. On the other hand, growth of sales in motor own damage insurance grew was 5.0% y/y (or PLN 307 million) and contributed the most to the market increase in the period.

In non-motor insurance, general TPL insurance (up PLN 167 million, +10.0%) and assistance (up PLN 105 million, +12.2%) made the most positive contribution to the overall insurance market’s growth. A decline in premium was observable only in legal protection insurance (down PLN 20 million, -24.8%).

In the first three quarters of 2019, the overall non-life insurance market generated a net result of PLN 3,930 million, up PLN 231 y/y. Excluding the dividend from PZU Życie, net profit of the non-life insurance market increased PLN 156 million (6.4%).

In the first three quarters of 2019, the technical result of the non-life insurance market fell PLN 255 million to PLN 2,116 million. The fall in the technical result in insurance against fire and other damage to property of PLN 324 million (as an effect of an increase in claims and benefits paid more than offsetting the growth in earned premium) and motor own damage insurance of PLN 260 million, offset by a PLN 302 million increase in motor TPL, had the largest impact on this change.

The movement in the technical result in the motor insurance group resulted from a combined effect of a higher earned premium (up by PLN 790 million, +5.2%) and an increase in the loss ratio of the motor own damage portfolio.

Non-life insurance market - gross written premium vs. technical result (in PLN million).

The following entities in the PZU Group operate on the non-life insurance market in Poland: the Group’s parent company, i.e. PZU, along with LINK4 and TUW PZUW.

To respond to client expectations in recent years, the PZU Group has been consistently extending its offering for retail and corporate clients, thereby sustaining its high market share.

In the first three quarters of 2019, the PZU Group had a 33.7% share in the non-life insurance market, compared to 35.9% in the corresponding period of 2018 (33.2% and 34.8% on direct activity, respectively), thereby recording a slight dip while retaining the portfolio’s profitability well above market average.

In the first three quarters of 2019, the PZU Group’s technical result (PZU together with LINK4 and TUW PZUW) stated as a percentage of the overall market’s technical result was 48.0% (the PZU Group’s technical result was PLN 1,016 million while the overall market’s technical result was PLN 2,116 million).

The total value of the investments made by non-life insurance companies at the end of Q3 2019 (excluding the investments made by their subsidiaries) was PLN 59,959 million, up 1.2% compared to the end of 2018.

The non-life insurance companies in total estimated their net technical provisions at PLN 55,582 million, up 4.8% versus the end of 2018.

Non-life insurance undertakings – percentage of gross written premium in the first three quarters of 2019 (in %)

PZU’s activity

As the PZU Group’s parent company, PZU offers an extensive array of non-life insurance products, including motor insurance, property insurance, casualty insurance, agricultural insurance and third party liability insurance. At yearend 2019, motor insurance was the most important group of products offered by PZU, both in terms of the number of insurance agreements and its premium stated as a percentage of total gross written premium.

Faced with changing market conditions, PZU realigned its offer in 2019 to clients’ evolving interests and needs by rolling out new products and innovative solutions.

In mass insurance, PZU did the following:

• developed a new offering of third party liability insurance for natural persons in private life, expanding the scope of this insurance by including damage caused by children under the age of 13 with a limit of up to PLN 10,000 without pursuing a claim of faults in parental supervision and damage related to short-term use of premises and their fit-out;
• expanded the scope of PZU Dom by including damage caused by children under the age of 13 (limit of PLN 10,000) and damage caused during short-term (up to 90 days) use of premises in the course of business or tourist trips. Moreover, the offering was supplemented in December 2019 with a clause enabling upselling the PZU Dom product with mandatory insurance of agricultural buildings, thereby providing a much broader coverage than that required by the mandatory insurance;
• made the health insurance bundle PZU Plan na Zdrowie – W trosce o Ciebie more attractive by including, among others, telemedicine examinations and the possibility of obtaining a prescription without the need to see a doctor in person;
• introduced a new offering of mandatory third party liability insurance for entities engaged in medical treatment activities and professional legal expenses insurance for physiotherapists performing their work in a professional practice (a change in the offering resulting from amendments to legal regulations as of 1 June 2019);
• in April 2019 it launched sales of a new option of the PZU AUTO Assistance product – PZU GO. PZU GO is an innovative product using telematic technology, thereby confirming PZU’s focus on developing innovative solutions as it cares for the life and health of its clients.

Most of the changes in the corporate insurance segment called for enhancing the effectiveness of collaboration with intermediaries and making the dedicated offer for car fleet clients and leasing companies more attractive. The most important activities related to the product offering were as follows:

• started submitting offers to leasing clients in quotation services by matching PZU’s offering to the client’s expectations and risk;
• rolled out and promoted prevention programs in motor insurance – Audax and Bezpieczna Flota (Safe Fleet) and in property insurance – RyzykoPRO;
• expanded the offering of cyber risk insurance by including coverage for medium-sized enterprises with the sum insured of up to PLN 20 million;
• developed a new offering in the field of property insurance in international transport, aiming to increase the degree of competitiveness and standardization of the proposal, in particular for clients in the business of both domestic and international transport;
• implemented efficient and cost-optimal solutions for the robotization of business processes in five areas, including back-office and front-office, which additionally supports the development of internal competence to maintain and develop robotized solutions in the future. Owing to the use of robotization, it was possible, among others, to shorten the time necessary to handle client requests, including the process of issuing damage certificates for corporate clients. A comprehensive approach to implementing robotization was recognized by Efma, which granted PZU the main award in the Efma & Accenture Insurance Awards 2019 contest.

In financial insurance, PZU was unswerving in its support for the Polish economy by providing insurance guarantees and securing the performance of contracts in such key areas as the power sector, the shipbuilding industry, the construction industry and the science and innovation sector. At the same time, in the area of portfolio insurance (financial loss under GAP), PZU expanded its cooperation by including new partners, including lease companies.

In 2019, PZU cooperated with 9 banks and 11 strategic partners. PZU’s business partners are leaders in their industries and they have client bases with enormous potential offering an opportunity to extend the offering to include more innovative products. PZU cooperates actively with the PZU Group’s member banks, continuing the roll-out of a comprehensive offering using the banks’ distribution networks. This cooperation with Pekao and Alior Bank allows PZU to gradually expand the offering and scale of sales of insurance products linked to bank products, including insurance coverage for cash loans and mortgage loans.

In strategic partnerships, cooperation was based mostly on companies operating in the telecom and power sectors through which insurance for electronic equipment and assistance services were offered, e.g. the assistance of an electrician or a plumber. PZU’s insurance offering is also present on the e-commerce market through cooperation with Allegro and PLL LOT.

LINK4’s operations

LINK4 entered the Polish insurance market as the first company offering products by phone; it still continues to be one of the leaders on the direct insurance market. It is extending its cooperation with multi-agencies, banks and strategic partners. The company offers an extensive array of non-life insurance products, including motor insurance, property insurance, casualty insurance and third party liability insurance. The company focuses predominantly on the development of innovative solutions providing added value to its clients and business partners. By using new technologies in internal processes and in relations with clients, the company continues to challenge the thinking of insurance. This was recognized by the jury of the Leaders of the Banking and Insurance World contest, which awarded LINK4 the title of the Best Digital Insurer of 2018. At the end of 2019, the company had in place 36 business processes executed fully or largely by robots. 

In 2019, the company focused on expanding further its current product offering by adapting it to the changing expectations of its clients and business partners. The most important activities associated with modifying its product offering were as follows:

• launch of cooperation with Lumi (a PGE Group brand), a supplier of electricity on the Warsaw market, offering clients value in the form of an exceptionally attractive combination of the insurance and energy offering along with a gift card of PLN 250, which can be used for purchases in Warsaw’s largest shopping centres or to buy gas at Orlen and Lotos stations;
• launch of an additional form of payment for insurance using BLIK, offering, as the first insurance company in Poland, split of payments into up to four installments in all sales channels;
• extending the offer to clients holding a motor policy with LINK4 to include:
• Post-theft Assistance offered to clients holding a motor TPL insurance policy or bundle. This is a benefit up to PLN 2 thousand, which the client may use for various expenditures related to the car theft, such as: purchase of things that were in the stolen vehicle but are not covered by motor own damage insurance, rental of a replacement car, taxi rides or registration of another vehicle. Additionally, the insured may use a hotline that is available 24 hours a day and 7 days a week,
• Weather alerts sent to drivers as a text message with information on the pending atmospheric event, allowing the clients to protect their cars against deteriorating weather conditions,
• Bad Weather Insurance – insurance offered to clients holding a TPL motor insurance concluded through a multiagency in the period from 17 June 2019 to 31 July 2019. The product is an insurance cover for losses involving damage to or destruction of a vehicle as a result of, among others, fire, hail or strong wind;   
• extension of the travel insurance cover, including supplementation of the standard cover to include chronic illness with the treatment costs limit of 20% of the sum insured;
• introduction of a joint offer of LINK4 and Credit Agricole, which provides one year of insurance on a bicycle, whose purchase is financed by an installment loan from Credit Agricole. The insurance covers loss of a bicycle as a result of theft with burglary to a family house, auxiliary building, apartment or accompanying premises. The benefit will also be paid out in case of a robbery or common theft, provided that the bicycle was properly secured;
• development of sales of the unique LINK4 Mama insurance brand supported with innovative calculators on the link4mama.pl website, for which in April 2019 the company was named the Leader of 2018 in the Techno Business contest organized by “Gazeta Bankowa” and previously received a bronze statue in the reputable MIXX Awards competition, for accessibility and practicality of the solution in the User Experience category;
• roll-out of a TPL insurance product for Eco-cyclists, providing third party liability coverage for damage caused to a third party in connection with the use of personal transport vehicles such as bicycles and electric scooters;
• extension of property insurance coverage.

TUW PZUW’s activity

2019 was another historic record-breaking year for TUW PZUW in terms of both sales and profitability.

The company offers its clients flexible insurance programs that optimize both costs and coverage. Since 2016, it has been selling and handling commercial insurance products targeted at clients from various industries, focusing predominantly on cooperation with large enterprises, medical centers (hospitals and clinics), local government units and church entities.

The company continues to experience a rapid increase in the number of its members, currently standing at over 380. In 2019, the largest rate of increase in the number of members was recorded among church institutions. Within the framework of TUW PZUW, 48 mutual benefit societies were established, bringing together members that fulfill specific criteria (industrial, corporate, in terms of risk types).

In 2019, the company continued to improve its product offering by modifying existing products and expanding its offering, for instance with a health insurance bundle. While attuning its operating model to the scale of business, the company keeps expanding its team of professionals to ensure the provision of comprehensive insurance services to its members and the capacity to tailor its insurance offering to the specific needs of clients.

The dynamic growth and performance in 2017 resulted in TUW Polski Zakład Ubezpieczeń Wzajemnych being noticed on the international market when it was added to the list of largest mutual insurance companies in the world. According to the Global 500 report prepared by the International Cooperative and Mutual Insurance Federation (ICMIF) and published in 2019, TUW Polski Zakład Ubezpieczeń Wzajemnych is the second fastest growing mutual insurance company in the world, ranking 471st in the ranking of 500 largest cooperative and mutual insurance companies in the world. 

Factors, including threats and risks, that will affect the operations of the non-life insurance sector in 2020

Besides chance events (such as floods, droughts and spring ground frost), the following should be treated as the main factors that may affect the situation of the non-life insurance sector in 2020:

• possible slowdown in economic growth in Poland. The more challenging financial standing of companies may result in elevated credit risk, a higher loss ratio on the financial insurance portfolio and deceleration in the pace of gross written premium growth;
• possible slowdown in the growth rate of gross written premium, mostly as a consequence of the motor insurance portfolio’s profitability generated in recent years, and thereby the conduct of an active pricing policy by market players and rivalry to attract clients;
• case law concerning the amounts of general damages paid in cash under the TPL insurance held by the owners of motor vehicles for suffering sustained to the closest family members of persons who have died (Article 446 of the Polish Civil Code);
• increase in the prices of spare parts affecting claims handling expenses due to the depreciation of the Polish zloty against the euro;
• changes in trends and client behavior toward customization of proposals and an electronic, swift and paperless method of purchasing and handling insurance, forcing insurance undertakings to adapt to these expectations rapidly;
• coming into force of further regulations or financial burdens on insurers.