The Slovak economy contracted by 4.7% in 2009, after growth of 6.2% in 2008, because of a lack of foreign demand due to the global economic crisis. The official outlook for 2010 is of a revival, with the Finance Ministry predicting GDP growth of 2.8% and the more optimistic central bank (NBS) forecasting 3.2% growth. This would place the Slovak economy among the fastest growing in the European Union this year, according to the national news agency TASR.

The financial and economic crises were reflected in the economic outcomes of the Slovak insurance industry. Insurance premiums decreased in all groups when the drop in purchasing power of the population was mirrored in insurance, Jozefína Å1/2ÁKOVÁ, the general director of the Slovak Insurance Association (SLASPO), told the Slovak Spectator newspaper.

There was less new Life insurance, fewer cars were bought and insured, and business activities were dampened. GWP and both the number of Life and Non-life insurance contracts decreased. Thus, overall GWP volume fell 3.87% to EUR2.02bn. Surprisingly, the Non-life insurance segment was the worst performer with a 4.36% drop to EUR957.43m.

Ups and downs

In Life insurance 2009 brought a clear return to traditional products while financial market volatility dampened the public appetite for investments products, especially for Unit-Linked policies. But even by the second half of the year this trend was less visible. It is interesting to note that surrenders accounted for approximately 90% of the indemnities paid for Unit-Linked policies, while for the traditional products, the percentage was also high but less than 60%, according to the NBS. The figures are consistent with the opinion of market specialists that many clients are closing their contracts because of their insufficient financial resources.

On the Non-life segment, motor classes produced the worst outcome. MTPL premium dropped 11.25% to EUR284.55m and, according to our own estimation, Motor Hull premium fell about 8% to almost EUR283m. In addition to the reduction in car sales, the motor insurance decline is the result of a fall in corporate fleet insurance contracts. Once a carrier’s business was significantly reduced, contracts for fleet motor insurance were not renewed at the same level as in the past. New insurance business was especially affected and decreased to EUR694.04m in 2009 from EUR902.4m in 2008.

However, the corporate sector gave an impetus to Property insurance business, as it seems that especially for small and mediumsized enterprises there was an increased awareness that it would be nearly impossible for a company to survive an unpredictable accident unless its assets were insured. Consequently, we estimate that Property lines GWP recorded an almost 5% increase to EUR230m.

The crisis as catalyst

Insurers responded to the difficult economic environment, the scarcely sufficient financial resources of the clients and sharpening competition, by developing new products, adapting better to their customers’ needs and with a more flexible approach to pricing and payment facilities. For example, in the Life insurance segment, ALLIANZ-SP offers capitalisation products with fixed payments of the insured sum, investment products, policies for children and risk life insurance.

innovation

Slovak insurers also confirmed increased customer interest in other forms of risk insurance that can help policyholders to pay bank loans or to cover everyday costs during sick leave. Slovaks are also more interested in covering the risk of job loss. In response, in September 2009 GENERALI Slovensko launched a new product that pays policyholders who find themselves in such situations the funds to settle such regular household costs as rent, utility bills, internet connection and phone line, tuition fees and other expenditures.

A positive feature of the crisis was a modernisation of the attitude to business, the development of new products, the management of human resources and in other areas, says Å1/2ÁKOVÁ. The crisis forced insurers to achieve higher efficiency and this will remain after the crisis is over.