Ever since the effects of the crisis became obvious, during the last months of the previous year, insurance brokers had to consider what its impact will be on the brokerage activity in Romania. But now, as thinks are much clearer, brokers try to find solutions to come out of the difficult situation and to place their activity back on the upward trend. And you will next read how they intend to do this...

Past, present and future

While the Romanian insurance market has been experiencing an impressive dynamic over the past several years, with a constant two-digit growth rate, our country’s brokerage market had an even better evolution. More precisely, the ratio between the brokers’ mediation volume and the total underwritings on the Romanian market went up from 19%, in 2004, to 27%, a percentage reached in 2008.

What happened in the first quarter of 2009?

The difficult economic situation generated by the financial crisis had major consequences on the insurance market’s dynamics and, implicitly, on the mediation trend. Still, while the insurance market was experiencing a decline in underwriting (the first one seen so far), the brokerage market managed to keep a “slightly upward” trend. Thus, in 1Q 2009, the mediations amounted to EUR 130 million, namely EUR 5 million more than in the same period of last year, which reflects a small increase by 4 points.

Therefore, amidst an economic crisis, when the lei-EUR exchange rate has not a positive impact on the bottom line of this fiscal year, when the business of leasing companies is free falling and the insurance market goes through its first decline, the insurance brokers’ business has proved to still be profitable.

The results fit within a margin estimated by UNSICAR at the beginning of this year, mentioning small variations in the turnovers. I believe the insurance brokerage market will continue to stay on this upward trend, despite the fact that 80% of the brokers’ business focuses on the motor industry, a sector strongly affected by the crisis, Bogdan ANDRIESCU, President of UNSICAR, stated.

Starting from the idea that you cannot grow if you are not optimistic, I believe in a continuous growing trend of the insurance brokerage market. The global financial crisis is here and it is reflected in the figures reported at the end of the first quarter. This is a result that gives us confidence, given that the real estate market is blocked, lending dropped by approximately 60%, the motor market is down to half, the insurance market experienced a small drop, and the insurance brokers’ market went up, even though by just 4 points, Antonio SOUVANNASOUCK, Managing Partner, ASIGEST, mentioned.

Moreover, according to the representative of ASIGEST, this achievement is the proof that insurance mediation companies have the ability to adjust to difficult macroeconomic conditions.

The figures for the first part of the year are caused by inertia. In my opinion, the biggest problem would be the expanding of the crisis over a longer time period, thus producing effects on the insurance and brokerage market, shortcomings that cannot be easily corrected, Cristian FUGACIU, General Manager, MARSH Romania, explained.

The portfolio of the brokerage market in 1Q of this year looks as follows: 58% Motor Hull insurance, 22% MTPL, the rest of the classes covering the remaining portfolio to 100%, without any significant shares. Thus, in a structure where over 80% of the mediation concerns solely motor policies, we can say that brokers might be focusing to a much too large extent on this type of insurance.

Actually, for several years now, the first ranking insurance brokerage companies (according to the mediated premiums criterion) are the ones affiliated to car dealers, to leasing companies or to well-known banking groups, as the activity they conduct brings a considerable contribution to the market’s development; in fact, the brokers’ business represents about 23% of the total insurance market (in 1Q/2009).

However, this is not a surprising situation, considering the structure of the national insurance market, where over 60% of the underwritings represent motor policies.

Who sells through brokers?

At present, the Romanian brokerage market includes 485 brokerage companies, conducting mediations for 44 insurers, namely all companies present on the relevant national market.

Moreover, there are more companies with considerable percentages in underwriting through brokers on the Romanian market. Among the companies selling over half of the total volume throughbrokerage companies we include, on one hand, medium and small size companies, as well as insurers, active for a long time on our market, who consider that brokers represent the best way for a fast business growth. This second category includes FATA Asigurări (over 55% through brokers) and UNIQA Asigurări (53%).

At the same time, a good collaboration with brokers (>30% from underwritings) can be seen in companies like ALLIANZ-ŢIRIAC (48% of the total sales), BCR Asigurări (44%), GENERALI (42%), EUROINS (37%), ARDAF (36%).

Collaborating with brokers is essential for developing an insurance business. This is why our company focuses traditionally on such a partnership, Ioana MORCOVESCU, Corporate Sales Manager, EUROINS, underlined.

Developing the collaboration with the brokers is one of our targets for the near future. The brokers’ role is even more important in times of crisis, as they can have a vital contribution in re-starting the activity, Radu MANOLIU, Deputy General Manager, CREDIT Europe Asigurări, noted.

Shifting form a trading market to consultancy...

Given the financial crisis, the brokers active on the Romanian market changed their approach, considering it is necessary to shift from the trading market, where the broker’s role is firstly that of selling insurance policies, to a consultancy market, where the focus is placed rather on the broker’s relation with the client, on the advice he provides, as a specialist, and on servicing.

The main problem of the Romanian market is that it focuses too much on the selling part and less so on consultancy. I think the brokerage companies that will keep this approach will eventually stand to lose, because especially in this time of crisis, it ‘s no longer enough to simply sell an insurance policy, Karina ROŞU, CEO, AON România, underlined.

Meanwhile, brokers are now trying to put together a much better strategy so as to cope with the challenges. Which leads to the following question...

Retail or Corporate?

On this chapter, brokers have different opinions, as some think that, for the moment, the focus on retail cannot be financially sustained. On the other side, we have the brokers who say this is the right moment when the company’s strategy must be reconsidered and focused on the retail segment.

This crisis forced us to review our business model to make sure we can cope with the challenges; also, we wondered what the competition had to offer and, of course, we got to the old question: retail or corporate broker, which one offers a safer future?, Cerasela NERGHEŞ, General Manager, ASTOP Broker, outlined.

In these times of crisis, we need to move from a trading market to a consultancy market

Unlike last year, when we were talking about market-related difficulties, at present the main problem of the insurance brokerage market is an external one, namely the crisis... Retail has always been important for the market, but it is obvious that this segment requires appropriate investments. During a crisis, I think brokers will have minimum resources to invest in an extended network of agents; therefore, I am sure that, for now, expanding on retail is a viable solution, Cristian FUGACIU explained.

The customers prefer to rather go to a broker and, at the same time, brokers prefer to focus more on the retail segment. However, the brokerage market is in love with corporate and the solution it has to such a crisis is to focus again on this segment, Gheorghe GRAD, General Manager, SRBA Broker de Asigurare, underlined.

According to Antonio SOUVANNASOUCK, the optimum alternative for the next period is to keep the corporate customers and start on the retail segment as well. Thus, according to the ASIGEST official, it is most likely that, this year, the market will not sustain any decrease in the number of brokers as a consequence of unfair competition from insurance agents. ...This old story will now be visible as follows: people who were laid-off won’t become brokers, but will act like brokers, SOUVANNASOUCK added.

The retail segment is clearly a good solution for medium and long term. In this economic context, retail becomes increasingly interesting..., Cerasela NERGHEŞ thinks.

On-line issuing of MTPL, a turning point

The on-line issuing of MTPL policies, to become mandatory beginning 2010, will represent a turning point for insurance brokerage companies, as it may coincide with an improvement in the level of confidence regarding their activities.

The on-line issuing of MTPL policies will first and foremost favor the insurance brokerage companies. It will also be an opportunity for mediation companies, especially in the claims department, as the insurers’ claim centers won’t suffer from overcrowding, Viorel VASILE, Managing Partner, SAFETY Broker, stated. Meanwhile, this reality will deepen the unfair competition between insurance agents and brokers, Viorel VASILE added.

Also, the electronic issuing of MTPL policies will mitigate the fraud phenomenon, as the retroactive signing of policies will prove impossible.

2009: A difficult test

Therefore, brokers are faced with a difficult test this year, which will cause the strengthening of the relevant market, according to most representatives of the companies present at the Brokers’ Day from FIAR.

These tough economic times will make brokers stronger, as they will focus even more on the “consulting” part of this profession, the act of selling no longer being the only target.

Meanwhile, some of the challenges for 2009 include professional training which, at the moment, becomes more important than before. Because, when people lose their trust in insurance and the latter is no longer a priority, the brokers’ role becomes increasingly important, as it is their duty to persuade customers of the need to buy insurance, to keep the policy valid, so as to be covered in case of an unwanted event...