Read the opinion of one of the most important leaders of the Romanian insurance market about the financial crisis and how the company he runs plans to overcome this, only in this interview with...

Radu MUSTATEA

President of the Board ASTRA Asigurări - UNIQA

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Although he holds a Degree in Physics from the Bucharest University, MUSTĂŢEA worked from the very beginning in insurance, his apprenticeship taking place in ARDAF, where he soon became the head of the Bucharest Branch.

After the start off in ARDAF, Radu MUSTĂŢEA was part of the AGI Romania management team, and in 2002 he was appointed General Manager of the company.

In 2004, he became National Sales Manager at UNITA - VIG, choosing to take on a similar position at ASTRA Asigurări - UNIQA in 2005.

Since 2006, Radu MUSTĂŢEA is the President of the Board of ASTRA Asigurări - UNIQA; succeeding in less than two years to reposition the company in TOP 5, thus imprinting one of the most interesting expansions on the Romanian market.

I think this economic crisis impacted us especially because of today’s high pace of operating, in any field of activity. The crisis went from bank to bank, from investment to investment, the insurance companies were also involved in this process, and the deterioration in time lead to the collapse of this structure. This financial crisis is unprecedented, it has evolved rapidly and I believe it will end just as quickly.

PRIMM: What were the most visible effects of the financial crisis on the relevant Romanian market and especially on the operations of the company you represent? What do you think could be the medium and long term impact?

Radu MUSTĂŢEA: At the moment, it is totally wrong to say the economic crisis has no effects. Regarding the company I manage, the economic downturn was visible starting Q4 last year, especially in November and December, with a peak in January – February. Since March, this trend reached a plateau, at least according to our sales figures.

In terms of effects, the economic crisis turns more acute in certain areas: higher claims rate and increase in the average claim value. At the same time, the depreciation of the national currency impacted the relation with the repair shops and spare parts providers, as they now try to transfer certain costs from other areas to the insurers.

Apart from the service issue, we also have the situation affecting the leasing sector, where many customers no longer pay the installments and, implicitly, the insurance premiums. Another worrying effect would be the higher number of fraud cases: customers that are burning or hitting their car on purpose, and the compensation has to be paid by the insurer. The customer gets off the leasing contract and receives some money, especially if he paid 50% of the car value. In case the claim is 80% of the car value and the customer has paid 50% of the car, it is normal that he gets some money back. But it is very difficult to make the distinction between real and framed claim cases.

For instance, we now have a concrete case where a car caught fire before being recovered by the leasing company, because the customer did not pay the installments. There are some question marks in this case, but it is very difficult to prove the potential fault of the customer.

Another segment where this financial uncertainty was extremely obvious is the banking sector, where the slowing down or stopping of the lending impacts indirectly on the insurance industry; due to the loans granted by banks, the insurance companies wrote loan, home, property and life insurance policies. Besides the retail segment, the corporate segment is also affected, and we get a negative feedback from it.

There are other effects that can be added to the above listed ones: unemployment, leading indirectly to a loss of insurance policies, default on insurance policy payments, limited car sales etc.

Nevertheless, ASTRA-UNIQA reported an overall growth for the first three months of this year. We had a decline on some segments, but they were offset by the other business lines. Personally, I think the market will grow by 10-15%, if we calculate in national currency.

PRIMM: What are the main anti-crisis measures a manager or an insurance company must take in Romania so as to cope with the effects of the crisis, as well as with the increasingly fierce competition in the field?

R.M.: There are the so-called guidelines, namely action principles for such situations, but this financial crisis is unprecedented, it has evolved rapidly and I believe it will end just as quickly. I think the current economic crisis impacted us especially because of today’s high pace of operating, in any field of activity. The crisis went from bank to bank, from investment to investment, the insurance companies were also involved in the process, and the deterioration in time lead to the collapse of this structure. Some companies in collapse were saved by the state aid they received.

PRIMM: Do you think these circumstances of financial uncertainty favor managers with a vision or innovative companies?

R.M.: Yes, obviously, just like in wartime, you need to be innovative, to come up with new solutions, because in the current situation, if you follow the old paths, you are heading for a crash. The guidelines are based on previous experiences, but this crisis is unlike anything we ever faced in the past.

Our company also applied traditional methods, such as „cost-cutting” ones, but we came up with new solutions in the meantime: launching new products, discovering new markets, developing on niches. The principle I follow is ongoing development, to compensate for the losses in certain business segments.

PRIMM: What kind of development does ASTRA-UNIQA consider, or more precisely, what is the company’s strategy for the current year?

R.M.: For instance, we now have two major projects in their final implementation stage.

The first one relates to introducing life insurance in the ASTRAUNIQA portfolio, an area we did not cover properly in the past. Beginning last year, we have a new team in this field, and we plan to develop it. In this respect, we created a system to support life insurance sales: we now have a person specialized in life insurance in each branch, providing support for the sales force. The ASTRA-UNIQA sales force is specialized in selling non-life insurance, and reorientation is not an easy process. So far, we have had three such attempts, but now it seems we are about to succeed.

The second project will be the equivalent of a true “earthquake” on the insurance market: we want to give every person working at ASTRA-UNIQA a mobile electronic sale device, the size of a folder. This mobile device consists of a mini-laptop, with modem and printer, capable of issuing an insurance policy from any location.

The program is already underway in Bucharest, implemented by approximately 60 people, to be extended throughout the country. This is a novelty on the insurance market, the sales force is accustomed to using the pen or pencil a lot, the actual writing of an insurance policy taking about 30-40 minutes, which is pretty long. Of course, this change will be the equivalent of shifting from a pencil to a spaceship, but the sales force must adjust to this trend.

I believe this is the future in insurance; it won’t be easy, but an efficient sales force reduces costs, the information travels in real time, the tariff changes are also made in real time, without dosins of notifications.

For now, the training sessions are conducted only in Bucharest, but they will be held in each branch as well; as for the IT support, it is provided by several companies.

Besides the sales force that will benefit from this system, the people from service will also take advantage of this innovation. We hope that, by introducing the electronic claims file, we will reduce the time needed to settle such a file.

PRIMM: How long do you estimate it will it take for this system to be applicable nationwide?

R.M.: Within 3 months, maximum, the system will be rolled out in the whole country, as the program has been operational in Bucharest for a month now. We have purchased 1,000 such devices, the investment amounting to approximately EUR 1 million. We hope to make savings in excess of the invested amount, to which we add the environmental component of eliminating the paper forms. Under normal circumstances, it took 30 to 40 minutes to fill in a policy, now we hope it will take around 2 minutes.

We have another major project on the pipeline, related to the quality of services in the repair shops we collaborated with. Thus, randomly, we shall check: origin of spare parts, quality of work and time needed to complete the work, compared to the prices charged by the respective repair shop.

As the first company to implement a full-size system for the entire sales force in Romania, we hope this will cause an earthquake on the market.

PRIMM: The implementation of the mandatory household insurance is considered the opportunity of 2009. ASTRA-UNIQA already expressed its intention to participate to PAID with the maximum allowed quota. What do you expect from this project?

R.M.: We are the first company that has the approval of the shareholders to participate to the PAID capital within the limit provided for by the law, namely 15%. Personally, I think the law fills in a gap with a modest amount, more than bearable for the owners, which will solve an annual problem, whether we talk about floods or earthquakes. There had to be an insurance system that came up with a viable solution.

Meanwhile, the service is cheap and every person must take advantage of it, especially in this year of economic crisis.

From the perspective of an insurance company, the profitability of joining this system comes from cross-selling and up-selling opportunities, as the value of the policy does not cover the services provided by the company.

PRIMM: How do you see the implementation of the amicable report?

R.M.: There are many voices campaigning for postponing the introduction of this project, for two reasons: fraud and disturbing the activity in the insurance companies’ head offices, as they will be directly involved in settling the claim cases, once the Police force withdraws.

I think the implementation of the amicable report is needed, whether we do it beginning June 1st or December 31st, most likely, the situation cannot radically change over six months.

Anyway, ASTRA-UNIQA is prepared for this measure. We have organized training sessions, we have processed the materials and I believe our people have been ready for a year now.

PRIMM: What would be, briefly, the targets ASTRA-UNIQA set for 2009?

R.M.: As targets for this year, ASTRA-UNIQA has planned: a 19% increase on all business lines, the implementation of the above mentioned projects, 3rd place on the non-life insurance market and a RON 9 million profit. Also, for 2009, we decided to double the share of life insurance in the ASTRA-UNIQA portfolio, up to EUR 4 million.