«The number of insurance association owners is reducing, which could mean a smaller number of insurance companies in the future. One positive development for the insurance market is that it grows more rapidly than the economy,» Balta chairman of the board Bogdans Bencaks told BNN in an interview.
What are some of the most notable recent events in your sector?
The main thing to happen most recently is the consolidation process of market participants – the number of insurance association owners declines, which could mean fewer insurance companies in the future. Market consolidation process will improve the industry’s stability and allow insurers invest even more money in new solutions and customer service improvements.
Can you say economic conditions are improving and there is a lot of potential for economic growth in the market?
One positive characteristic of the insurance market – it grows more rapidly than the economy in spite of slower GDP growth. Last year, insurance market’s growth reached 6%.
Nevertheless, it is important to emphasize that growth of the insurance market is not a trend unique to 2016 – growth was also noticed in previous years, and we expect next year’s growth to be even higher. The main reason for this growth is that society values the importance of insurance and its offered financial stability.
How would you describe the government’s economy policy aimed at improving the economic situation in the country?
Insurance is a very specific field – no one views insurance as a first necessity service. Why not? Because insurance offers a sense of security, which cannot be measured by conventional methods; at least not until something happens that turns life upside down. This is why increasing public awareness is paramount – the majority of people are aware what OCTA, KASKO and property insurance is. Awareness of other insurance services, on the other hand, is significantly lower. Raising awareness requires time and patience. Generally the trends are positive – a look at 2016 shows that the number of new clients will likely increase.
The biggest challenges on the government level include efforts to combat grey economy, measures to resolve demographic problems and plans for effective use of EU funds.
How is the industry affected by Latvia’s policy? What changes to legislation would you like to see? What helps? What makes things more complicated?
Balta is a member of Latvian Insurers Association, Latvian Automobile Insurers Bureau and the Foreign Investors Council in Latvia. We are represented and involved in policy-making processes associated with the field of insurance. We have the opportunity to express our opinion – this is the main aspect in relation to support. Last year, Balta successfully introduced the new Insolvency II regime, which represents a single standard for all insurers in the European Union.
How would you describe the industry’s position in the Baltics? What about competition with Estonia and Lithuania?
Balta does not compete with either Estonia or Lithuania. This is because we have subsidiaries in both those countries. In regards to the industry as a whole, I have to say there are differences, especially when it comes to prices. For example, while the average OCTA bonus in Latvia is EUR 62 annually, in Estonia it is EUR 105 and in Lithuania – EUR 107. Competition among insurers in Latvia is much greater – clients only benefit from it, of course, because the insurer has to consider the best and most economic solutions to suit the client’s needs.
What can you can your ‘trump card’? What is your ‘Achilles’ heel’?
Blata is an insurance company with more than 25 years of experience on the market, 580 participants and 42 offices across all of Latvia. We are part of PZU, which is a leading insurer in Central and Eastern Europe. Their experience is measured in hundreds of years.
As for any Achilles’ heels we might have, we should definitely mention the price war, which has recently become stronger. Neither clients nor Latvia’s economy will benefit from it.
Data from the Central Statistical Bureau of Latvia on wages in Latvia in 2016 shows that the largest wages were noted in the finance and insurance sectors, IT and communications services, energy industry, state administration and mining and quarrying.
How do you pick your employees and what skills do you need to have to be competitive on the insurance market?
There are different specialists working in the insurance industry – those that specialize in insurance and those whose education is associated with a different industry. Insurance, like the labour market, requires people with appropriate education, work experience in the business environment, teamwork-oriented personality and the ability to learn and improve one’s skills.
Would you say there is a lack of skilled workers in Latvia?
As one of the best employers in Baltic States, we do not feel any acute lack of labourers. There are jobs filling which requires time because of very specific requirements. We are prepared to invest in development of employees, so we do not expect the labour market to provide us with workers with all the necessary skills. We welcome people with high potential, capable of growing along with the company. Looking at the labour market a whole, we see that there are plenty of people qualified to work in the finance sector. Of course, competition for talented workers is intense, but this is normal for all countries around the world.
What do you predict for the next five years? Will the situation in the industry improve, worsen or remain the same?
In addition to economic growth, the insurance market will be affected by two other major factors in 2017: increase of the number of new clients and increase of insurance service prices. The latter is associated with inflation of insurance compensations, the rate at which insurance cases are reported and low profitability of certain insurance services. We expect health insurance segment will grow more rapidly than the entire insurance market, retaining annual growth at 9-10%. General insurance trends are also affected by technological development. More and more consideration is given to cyber risk insurance.