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

PZU offers a wide range of non-life insurance products and other property products in each insurance group. The non-life insurance market in Poland measured by the gross written premium in the first three quarters of 2016 increased by a total of PLN 2,841 million (+14.2%) compared with 2015. 

Situation on the market

The non-life insurance market in Poland measured by the gross written premium in the first three quarters of 2016 increased by a total of PLN 2,841 million (+14.2%) compared with the corresponding period of the previous year.

Increased sales of MTPL insurance by PLN 2,141 million, and motor own damage insurance by PLN 694 million, mainly as a result of substantial growth in premium average and higher premiums from indirect business had the biggest impact on the higher level of premiums.

Increased sales of MTPL insurance (by PLN 2,141 million, +34.7%) and motor own damage insurance (by PLN 694 million, +16.9%), mainly as a result of substantial growth in premium average (which is a consequence of cyclical increases that are being introduced since 2015 as an answer to persistently negative results of the motor insurance market) and higher premiums from indirect business (increase in MTPL of PLN 192 million year-on-year), had the biggest impact on the higher level of premiums.

Furthermore, there was a growth recorded in sales of property insurance (by PLN 256 million, +5.9%, PLN 135 million of which concerns indirect business) and insurance of assistance (by PLN 146 million, +31.1%, including a PLN 142 million growth on direct business), which was mainly a consequence of raise in growth rate of premium from motor insurance.

The drop in premiums was most visible in TPL insurance (drop by PLN 196 million, -11.8%, PLN 161 million of which concerns direct business), legal protection insurance (drop by PLN 113 million, -73.2%, PLN 113 million of which concerns direct business), as well as accident and illness insurance (drop by PLN 77 million, -4.5%, PLN 107 million of which concerns direct business).

The whole of the non-life insurance market in the first three quarters of 2016 generated a net profit of PLN 1,233 million (drop by 37.3% compared with 2015).

The whole of the non-life insurance market in the first three quarters of 2016 generated a net profit of PLN 1,233 million (drop by 37.3% compared with the same period of the previous year). Excluding the dividend from PZU Życie, the net profit of the non-life insurance market grew by PLN 131 million (47.3%). After the first three quarters of 2016, the technical result of the non-life insurance market dropped by PLN 212 million, i.e. by 51.9% to the level of PLN 196 million. This change was affected to the greatest extent by the drop of the technical result in MTPL insurance (PLN -251 million) and in the group of property insurance (PLN -201 million). Some positive changes were recorded in the group of accident and illness (increase by PLN 87 million), motor own damage (increase by PLN 83 million) and TPL insurance (increase by PLN 80 million).

The drop of the technical result in MTPL insurance derived mainly from higher dynamics of claims and benefits (increase of PLN 564 million, +12.3%), if compared with the dynamics of net earned premium (growth by PLN 493 million, +9.5%), which resulted predominantly from the implementation of the PFSA recommendations causing raise in average payment as well as from strong price competition ongoing in recent years.

Simultaneously, a technical result decline was recorded in the group of insurance for damage caused by forces of nature (PLN -246 million on direct business) as a result of numerous claims in agricultural insurance which were caused by frost and hail.

The value of investments of non-life insurance companies at the end of Q3 2016 (excluding subsidiary investments) was PLN 53,064 million and rose by 1.9% from the end of 2015.

Non-life insurance market – gross written premium (PLN million)

Non-life insurance companies, on aggregate, estimated the value of net technical provisions at PLN 43,343 million, which represented an increase of 3,9% compared with the end of 2015.

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

Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance Market 3/2016. Insurance Market 3/2015, Insurance Market 3/2014, Insurance Market 3/2013, Insurance Market 3/2012.

Non-life insurance companies - share in gross written premium for 3 quarters of 2016 (%)

Capital groups: Allianz – Allianz, Euler Hermes; Ergo Hestia – Ergo Hestia, MTU; Talanx – Warta, Europa, HDI; VIG – Compensa, Benefia, Inter-Risk
Source: PFSA Quarterly Bulletin. Insurance Market 3/2016
*The share of PZU Group calculated including the inward reinsurance of PZU to LINK4 and TUW PZUW

PZU’s activities

PZU, being the parent entity of PZU Group, offers a wide range of non-life insurance products, including motor, property, personal and agricultural insurance, as well as third party liability insurance. PZU has been controlling over 1/3 of the non-life insurance market by offering over 200 insurance products, of which the most important is motor insurance, with its share in the market amounting to 37.3% after the first three quarters of 2016, compared with 35.6% after the first three quarters of 2015.

After the first three quarters of 2016, the share of PZU’s technical result in the market’s technical result was 169.7%, which, with the market share of 33.3% calculated using the gross written premium, confirms the high level of profitability of the insurance.

Non-life insurance market – technical result (PLN million)

In the changing conditions and in the face of new needs and interests of the clients, PZU introduced new solutions to its insurance offer in 2016. In the mass client insurance:

• PZU DOM [PZU HOME] product was introduced to online sales of household insurance, offering, among others, protection from all risk, which covers also the damage caused by uncommon and unpredictable events. The offer was accompanied by „Od Wszystkich Ryzyk” [From all risks] marketing campaign conducted through i.a. TV, radio, and social media;
• existing offer of personal insurance was made more attractive by broadening the catalogue of additional benefits and introducing to the market a new comprehensive PZU Edukacja [PZU Education] product for educational establishments as well as individual client;
• offer of general TPL insurance was extended in terms of the scope of responsibility by the addition of clauses covering environmental damage, damage due to package and label defects, and damage resulting from providing IT services;
• in order to approach the clients’ need, online sales of the PZU Wojażer insurance were launched, which was accompanied by Spokojny Wypoczynek [Peaceful leisure] campaign basing on activities using the Internet.

In corporate insurance segment, the majority of changes concerned regular introducing the products dedicated to corporate client to service and sales through the Everest system of, including:

• change in the approach towards pricing by implementing the model basing on the size of the fleet, which replaced the previous one that depended on the client’s segment;
• modification of the existing distribution model, which allows the agents and multiagents to offer and sale basic non- motor products on their own by using the Everest platform;
• starting the works on extending the existing offer with new risks, including cybernetic risk incurred by enterprises.

In terms of financial insurance, PZU consequently supported Polish economy by granting insurance guarantees in its key areas, such as energy, infrastructure, and road construction. Among the main initiatives of 2016 were:

• increasing efficiency of the cooperation with SME sector by simplifying and accelerating the decision process – new rules for guarantee sales to the clients with guarantee exposure of up to PLN 1.5 million were introduced;
• conducting activities aiming at increasing the market share concerning financial liability insurance – in H1, an agreement was concluded with a large entity from the fuel sector.

In 2016, PZU cooperated with 8 banks and 8 strategic partners. The partners of PZU are the leaders in their fields and have customer bases with great potential to expand the offer with successive products. The cooperation in the scope of strategic partnership concerned mainly the companies operating in telecommunications and energy, which were used to offer insurance of electronic equipment and assistance services. The sales of protective non-life insurance performed within bancassurance covered mainly the insurance of buildings, structures and residences, as well as insurance dedicated for payment cards.

In 2016, PZU collected gross written premium of PLN 10,682 million, which was 20.6% more than in the previous year. At the same time, the sales structure changed only slightly:

• value of MTPL insurance was PLN 4,072 million, which was 44.2% higher than in the previous year. It composed 38.1% of the entire portfolio, and its share grew by 6.2 p.p. from 2015. The increase in sales resulted mainly from substantial growth of average premium (a consequence of cyclical increases that are being introduced since 2015) and higher number of insurances;
• PZU collected premiums amounting to PLN 2,760 million from motor own damage insurance, which is 27.3% more than in the previous year. Share of motor own damage insurance in the overall portfolio grew by 1.4 p.p. to 25.8% in comparison with 2015;
• share of gross premiums from non-motor insurance in total premium increased to 36.0% (as compared with 43.6% in 2015). The value of gross written premium dropped by 0.4% year-on-year to PLN 3,850 million

In 2016, PZU generated a net profit of PLN 1,593 million, of which PLN 825 million was from the dividend from PZU Życie.

The gross written premium in PZU (PLN million)

Activities of LINK4

LINK4 is the leader of the Polish direct insurance market and offers a wide range of non-life insurance, which covers motor insurance, property insurance, personal insurance, and third party liability insurance.

Motor insurance is the most important group of products offered by LINK4, both in terms of the number of binding insurance contracts and the premium share in the total gross written premiums. During the previous two years, LINK4, by introducing innovative solutions made many changes to its product offer, which were intended to adapt the offer to the changing market demands and trends. In 2016, the most important activities related to the change in product offer were:

• start of cooperation with PAYBACK loyalty program, which allows to collect points for purchasing LINK4 products and to pay for insurance with the points collected;
• introduction of a solution facilitating concluding insurance contracts, which consists of decreasing the number of declarative data and replacing them with confirmed data coming from external Insurance Guarantee Fund bases (the project: „short calculator”).

In case of business client insurance, the strategic decision was made to transfer the corporate client service to PZU. Taking into account definitely greater experience in quotation and amount of regulatory capital, from Q2 2016 the insurances for corporate clients are offered under the PZU brand.

In 2016, LINK4 collected gross written premium of PLN 729 million, most of which concerned motor insurance, respectively:

• value of the MTPL insurance was PLN 558 million, which constitutes 76.6% of the entire portfolio;
• value of the motor own damage insurance premium was PLN 110 million, which composes 15.1% of the entire insurance portfolio.

Activities of TUW PZUW

Towarzystwo Ubezpieczeń Wzajemnych Polski Zakład Ubezpieczeń Wzajemnych (TUW PZUW) has been active on the insurance market since 29 February 2016, when it started its insurance business by concluding its first insurance contract. The offer of TUW PZUW covers the products for enterprises from different industries, both medical establishments (hospitals and outpatient clinics) and larger economic entities (i.a. local governments and private companies). The entities cooperating under the TUW model are able to distribute the risk in the scope of mutual relations adapted to the specifics of a given group of medical entities, which will reduce the costs of insurance premium. The Company has 76 members for which 25 mutual relations for members have been created.

In 2016, TUW PZUW collected gross written premium of PLN 138 million, most of which concerned property insurance, including:

• insurance for damage caused by forces of nature – PLN 88 million, which constitutes 64.0% of the entire portfolio;
• insurance for other tangible damage – PLN 21 million, which constitutes 15.1% of the entire portfolio;
• assistance – PLN 10 million, which constitutes 7.1% of the entire portfolio; and 
• third-party liability insurance – PLN 9 million with the share in portfolio of 6.2%.

The insurance portfolio offered by TUW PZUW is covered by a substantial reinsurance in PZU.

Factors, including risks and dangers, which will impact the activities in the non-life insurance sector in 2017 Apart from events of a catastrophic nature (such as floods, drought and spring frost), the main factors which can affect the situation of the non-life insurance sector in 2017 include:

• the potential slowdown of the economic growth in Poland resulting from the deteriorating external conditions entailing expected unprecedented lack of investment growth and declined perspectives of economic growth. In consequence, the limitation of household spending, including purchase of motor policies (as a result of lower new car sales), lower sales of mortgages and the mortgage related insurance, as well as lower demand for other non- life insurance. The poorer financial standing of businesses can result in a growth in credit risk and an increase in the level of claims in the financial insurance portfolio;
• stronger than expected inflation growth not compensated with growth of nominal salaries entailing decline in dynamics of real remuneration and limited household expenses – including those for non-life insurance;
• prospect of higher inflation and economic favoring growth of government bond yields, which in the long term is beneficial for PZU Group, although in the short term, it may adversely affect the investment income. Numerous risk factors escalating volatility on financial markets in 2017 and potentially serious effects of unpredictable political decisions or election results in key European Union countries, which may considerably alter perspectives of individual asset classes on financial markets;
• decisions of supreme courts in the scope of monetary compensation from the MTPL insurance of owners of motor vehicles to the closest relative of a person for pain and suffer claims resulting from the violation of his or her personal welfare even if the damage took place before 3 August 2008;
• potential raise of claims handling costs resulting from the implementation of further recommendations of PFSA concerning claims handling, especially personal claims;
• raise of spare parts prices with effect on claims handling costs resulting from the successive drop of PLN against EUR;
• further regulations or financial burdens imposed on insurers – e.g. a possible reinstatement of the so-called Religa tax (i.e. compulsory fee payable to NFZ from every MTPL policy).