Economic growth, rising life expectancy and a shift in marketing and distribution strategies will boost the Eastern European markets of Poland, the Czech Republic and Hungary over 2013-2018, according to reports from Timetric’s Insurance Intelligence Center (IIC)
Polish, Czech and Hungarian life insurance markets matter because they are the top three largest sectors respectively in Central and Eastern Europe, according to data from Timetric’s Insurance Intelligence Center (IIC).

For example, the IIC report Life Insurance in Poland, Key Trends and Opportunities to 2018, says insurance companies operating in Poland generated a total written premium of PLN57.2bn ($15.4bn) in 2013.

Life insurance was the largest segment in Poland in 2013, accounting for 53.3% of the industry’s total value, while the non-life segment accounted for 41.1%.

The Polish life segment posted minimal growth during 2009-2013 primarily due to the global financial crisis in 2009 and the subsequent EU debt crisis.

This minimal growth meant the gross written premium of the Pol¬ish life segment increased from PLN29.7bn in 2009 to PLN30.5bn in 2013. It is expected to reach PLN40.3bn in 2018.

Looking forward to 2018, the key growth drivers for the Polish life segment include:

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  • Steady economic growth
  • Low life insurance penetration
  • Cost-effective distribution channels
  • Rising life expectancy

Steady economic growth: Poland’s economy is expected to grow between 2013 and 2018. According to the International Monetary Fund’s (IMF) World Economic Outlook report of April 2014, the country’s GDP is projected to grow by 3.1% in 2014 and 3.3% in 2015, driven by the government’s growth-focused reforms such as the National Reform Program and Convergence Program.

Low life insurance penetration: The penetration rate for Polish life insurance was 1.86% in 2013, significantly lower than the UK’s 8.68% and France’s 5.57%. This makes the Polish life insurance segment highly underpenetrated, with significant growth potential.
Cost-effective distribution channels: The Polish life segment is moving towards cost-effective channels such as direct marketing and e-commerce.

Polish insurers also recognise that bancassurance can provide an important and cost effective channel for distributing products.
In terms of gross written premium from new business, bancassurance was the largest distribution channel in the life segment in 2013. The value of new business gross written premium through this channel reached PLN4.8bn in 2013.

In spite of its dominance and projected growth, Poland’s bancassurance market has been under scrutiny. In October 2012, the Polish Insurance Association (PIA) and the Polish Banks Association (ZBP) proposed several recommendations for business practices for banks. The recommendations were implemented in January 2013, and are expected to improve efficiency and standards over 2013-2018.

Bancassurance reform

Wojciech Ksiazkiewicz, deputy general manager for Central and Eastern Europe at RGA International, says bancassurance reform in Poland, among other changes, will give consumers more information about the product they are to purchase, as well as freedom of choice about purchasing life insurance policies.

The e-commerce channel was the fastest-growing distribution chan¬nel in Poland’s life insurance market during 2009-2013 registering a CAGR of 221.4%, in terms of new business gross written premiums. This was mainly due to an increase in the number of internet subscribers and smartphone users. The number of internet subscribers increased from 22.7m in 2009 to 25.3m in 2013 and is expected to reach 28.3m in 2017.

Rising life expectancy: Average life expectancy in Poland increased from 75.6 years in 2009 to 76.5 years in 2013. It is further expected to reach 77.2 in 2017.

Asked what trends to expect in Poland’s life and health insurance sector over the next two to three years, Michael Haas, director, head of life and health Austria and CEE at Swiss Re, says there will be a major shift to protection business in the future.
In particular, Hass says health related products like cancer or critical illness schemes are required to bridge the disability protection gap and meet consumer needs.

"Swiss Re is and will remain very active in Poland which is one of our core markets in Central Eastern Europe," says Haas.

On bancassurance, he adds that it will be more important to differentiate with more valuable protection products. "The products will become more attractive for the consumers and that means that they also will spend ultimately more for insurance protection."

Among the main challenges facing the Polish life segment according to the IIC report are:

  • Poland’s accession to the eurozone
  • Decreasing insurance penetration
  • A decline in investment income

Poland’s accession to the eurozone: Although Poland joined the EU in 2004, it has not yet adopted the euro. A decision on whether the country will adopt the euro is likely to take place following the parliamentary elections that will take place in 2015.

Decreasing insurance penetration: The insurance penetration in the Polish life segment decreased during from 2.21% of GDP in 2009 to 1.86% in 2013. The penetration rate remained stable until 2012 and declined in 2013. This decline was mainly due to a decrease in direct written premium in 2013.

Decline in investment income: The total investment income of life insurers declined at a rate of -16.1% and -23.6% in 2010 and 2011 respectively. This was due to a decrease in returns on investment in equities, which had been capricious during the review period due to changeable economic conditions in the financial markets.
In the life segment, return on equity declined from 27.2% in 2010 to 21.6% in 2012, reflecting the instability of the economy, due in part to the eurozone debt crisis.

Competitive landscape

The Polish life segment is highly concentrated, with the ten leading insurers accounting for 81.6% of the segment’s gross written premiums in 2013. As of 31 March 2014, 27 companies were licensed to conduct life insurance business in Poland. The entry of leading multinational insurers into the Polish life segment has made the industry more competitive.

The five leading insurers in the segment, PZU Zycie SA, Open Life Tu Zycie SA, Tunz Warta SA, ING Tunz SA and Amplico Life SA, collectively accounted for 56.7% of the segment’s gross written premiums in 2013.

The segment is dominated by foreign insurers and the majority of segment’s written premium is generated by foreign companies. Foreign insurers operate in Poland through joint-stock companies.

The Polish life segment is expected to consolidate further by 2018. The proposed implementation of Solvency II regulations in January 2016 is likely to encourage this.


Czech Republic
In terms of gross written premium, the Czech Republic has the second-largest life insurance segment in Central and Eastern Europe, after Poland, according to the IIC.

The country’s economy remained under pressure during 2009-2013 as a result of the global financial and eurozone debt crises.

The Czech life insurance segment accounted for 39.6% of the gross written premium of the overall insurance industry in 2013. The non-life insurance segment accounted for 48.8% of the overall insurance industry’s gross written premium in 2013.

The gross written premium of the Czech life segment increased from CZK53.23bn (($2.2bn) 2009 to CZK62.08bn in 2013. By 2018, the figure is expected to rise to CZK74.13bn.

Looking forward to 2018, the key growth drivers for the Czech life segment include:

  • Pension reform
  • Expected economic stability
  • An increase in life expectancy
  • Increasing popularity of unit-linked products

Pension reform: On 1 January 2013 pension reform took place that is expected to provide significant business opportunities to both existing life insurers and new entrants.

As of 1 January 2013, pension reform made changes to the manda¬tory first pillar, transformed the voluntary third pillar and created a new voluntary second pillar. Life insurers will also benefit from the pension reform, as to get into the second pillar, people will have to purchase pension insurance from life companies.

Expected economic stability: Growth in real GDP is expected to increase consumers’ disposable incomes, which will have a positive impact on the life insurance segment.

Increase in life expectancy: According to the World Bank, the average life expectancy of the Czech population rose from 71.4 years in 1990 to 75 years in 2000 and to 77.9 in 2011. It is expected to increase further to 78.4 years in 2018, which will contribute to the life segment’s growth.

Increasing popularity of unit-linked products: The life segment has gradually evolved from risk-protection products to investment-related products. Unit-linked insurance products have steadily grown in popularity, and sales of these products were the key growth driver for the segment during 2009-2013.

The contribution of unit-linked insurance products, in terms of gross written premium, increased from 45.3% in 2009 to 59.4% in 2013. This contribution is projected to increase further to 62.8% in 2018.

Among the main challenges facing the Czech life segment are:

  • A rise in the unemployment rate
  • A decline in GDP
  • A decrease in the population

A rise in the unemployment rate: In the Czech Republic, the number of registered, unemployed people in the population has increased, and as a result the unemployment rate increased from 4.4% in 2008 to 7% in 2012.

Decline in GDP: Czech GDP at constant prices fell from $151.7bn in 2008 to $149.3bn in 2012, at a CAGR of -0.5% during the review period, which emerged as a challenge for the insurance industry.
A decrease in the population: The Czech population fell from 10.22m in 2008 to 10.18m in 2012. The decline is expected to continue between 2013 and 2018, which will continue to limit the life segment’s growth.

Competitive landscape

The Czech life segment is highly concentrated, with the top 10 com¬panies accounting for 89.4% of its gross written premium in 2012.

Ceska Pojistovna AS, a subsidiary of the Generali Group, was the largest life insurer in the Czech Republic, with 23.1% of the total life gross written premium in 2012. In the same year, Kooperativa Pojis¬tovna AS and Pojistovna Ceske Sporitelny (PCS) AS ranked second and third, with 13.2% and 12.1% shares respectively.

The segment is highly competitive, with both domestic and foreign companies. The foreign insurers operate through joint ventures or local subsidiaries with domestic companies.


In terms of gross written premium, the Hungarian insurance industry is the third-largest in Central and Eastern Europe, after Poland and the Czech Republic.

The Hungarian life insurance segment accounted for 54.9% of the overall insurance industry’s gross written premium in 2013. Life insurance was the largest segment within the industry, with 54.9% of the total premium in 2013, followed by non-life insurance with 41.7%

The Hungarian life segment’s gross written premium is expected to increase from HUF433.7bn ($1.6bn) in 2013 to HUF560.2bn in 2018, at a projected CAGR of 5.3% over the forecast period. This growth is expected to be driven by the country’s rising disposable income levels. Looking forward to 2018, the key growth drivers for Hungary’s life segment include:

  • Low penetration
  • Rising aging population and life expectancy
  • Dominance of agencies
  • Economic growth
  • Marketing strategies and consumer-centric products

Low penetration: The life insurance penetration rate in Hungary stood at 1.4% in 2012 – lower than in other European countries such as Germany and Poland, which had respective penetration rates of 3.3% and 2.2% in 2012.

In 2013, Hungary’s penetration rate increased slightly, standing at 1.5%. The low penetration rate offers opportunities for life insurers to capture the untapped market, and lead to the life segment’s growth between 2013 and 2018.

Rising aging population and life expectancy: Hungary’s population above the age of 65 years is expected to account for 40% of the overall population by 2025. There were 1.7m people over the age of 65 in the country in 2013, comprising 17.5% of the population. This is further expected to stand at 1.9m in 2017.

Dominance of agencies: Agencies emerged as the most popular distribution channel for Hungarian life insurance during the review period. In 2013, agencies accounted for 45.2% of new business written premium, followed by direct marketing and bancassurance, which accounted for 24.9% and 24.1% respectively.

Agencies are expected to remain Hungary’s largest distribution channel over the forecast period, accounting for a projected 43.1% of the new business written premium in 2018.

Economic growth: Hungary’s unemployment rate fell from 10% in 2009 to 9.9% in 2013, and is expected to reach 9.1% in 2017. Economic growth led to increased GDP per capita at current prices, which rose from HUF2.6m ($12,654) in 2009 to HUF2.9m 2013, and is expected to reach HUF3.5m in 2017, driving demand for life insurance between 2013 and 2018.

Marketing strategies and consumer-centric products: Insurers in Hungary have adopted various marketing strategies that have led to greater demand for insurance. Aegon, for example, introduced a term life insurance product for private individuals and corporate officials.

Among the main challenges facing the Hungarian life segment are:

  • Low income levels
  • A fall in the population

Low income levels: Hungary’s gross national disposable income stood at $116.8bn in 2011, compared to $117.1bn in 2009. According to the OECD Survey of 2013, the average household net adjusted disposable income in Hungary was $13,858, far below the OECD annual average of $23,047.

A fall in the population: Hungary’s population fell from 10.01m in 2009 to 9.94m in 2013, with this being expected to continue between 2013 and 2018. The continued negative growth of Hungary’s popu¬lation has become a concern for life insurers.

Competitive landscape

The Hungarian life insurance segment is highly concentrated, with the top 10 companies accounting for a 83.9% of the total life written premium in 2012. The top five companies – ING, Allianz, Groupama, Generali-Providencia and Magyar Posta – together accounted for 55.8% of the total life gross written premium in 2012.

As for the outlook for the Czech and Hungarian life segments, RGA International’s Ksiazkiewicz is more optimistic about the prospects for Hungary, than the Czech Republic. He says the Hungarian market is developing much faster than the Czech Republic, despite the country’s financial problems.

Ksiazkiewicz sums up the challenges facing the Polish, Czech and Hungarian life markets by saying: "There is a need to bring new ideas to the market in terms of products and distribution. I think there will be growing demand from the client side for something different."