Focus on broker channel brings substantial 2019 growth for Romanian re/insurer

Romanian re/insurer City Insurance has reported a substantial rise in its issued insurance policies in its 2019 preliminary results, as Renato Szilagyi, board vice president, visited the UK to meet investors and discuss reinsurance.

The company's issued insurance policies increased by 28 percent in 2019, compared with the year before, reaching a value of €410 million. For the same 12 month period, the amount of claims paid also grew reaching a value of €244 million, up 33 percent from 2018.

City Insurance said that the number of filed claims paid, up to the end of December 2019, was 152,483 compared with 117,084 in 2018, representing a rise of 30 percent.

Szilagyi told Intelligent Insurer that the Bucharest headquartered re/insurer was looking for capital to expand the business, which offers motor, health and property lines.

“Our preliminary results for 2019 are inline with the plan, actually they are slightly above the plan, which should be good for the investors, the shareholders,” he said.

The company is outstripping average market growth of 9 percent for the non-life insurance market in Romania, Szilagyi added, referencing figures from the country’s regulators.

“We do have a business model that is working and generating business and getting results, and going in the right direction.

"We have an almost exclusive focus on the broker channel. The reason is that the broker channel increased a lot in the Romanian market in the last few years. Currently it is about 80 percent in the whole of the country’s non-life insurance market."

Competitors in the market do not have the same level of focus on broker channels, explaining the difference in growth to a degree.

Szilagyi added: “Currently it doesn’t make any economic sense to try to distribute insurance products via your own distribution network as long as the market is basically in the hands of the brokers.”

Another reason for this strategic focus on the broker channel, a move the company made in early 2012, was because City Insurance lacked the resources to develop its own distribution network, he added.

However, to maintain the focus on the broker channel “you need to back it up with technology” to automate the process and give the brokers the functionality of a flawless system.

Fortunately, the firm has its own software developer team in-house. “This enables us to adapt  and develop new products very fast and to be consistent in the services we provide to the brokers.”

Szilagyi said they are working with the top 10 brokers in Romania, including the largest broker in the country called Safety Broker. These broking firms are responsible for the top 75 percent to 80 percent of City Insurance’s business, he explained, because they are large organisations with thousands of sales people all over the country.

“The international brokers are more focused on industrial and commercial business, so they do not have such a large presence, because this business is quite concentrated.”

Competitive pricing is another important element of the re/insurer’s growth, something that the strategic use of big data has supported, Szilagyi said. Four years ago, the Romanian regulators made an actuarial study of the market publically available. This data formed the basis of the re/insurers initial data analysis to make its pricing as accurate as possible. Now the company has built up its own data set with 10 million data points.

“We do not aim to have a huge profit margin. What we calculate is a narrow profit margin, what matters here is the accuracy of our actuarial work.”

As the country’s population is becoming more affluent, travelling more, buying more, borrowing more, they are demanding more and better insurance products, a change that Szilagyi described as “a positive trend in the market”, as he highlighted Romania’s significant protection gap.

“Motor third party liability is the only product that is regulated at European level, it is still the most prominent product in the market.”

However, he added: “Last year, we experienced a significant increase in optional motor coverage. People are buying new cars, financing them and they need to insure them, so this is a very important line for growth. We also expect to see a significant increase in the property business. There is an increase which is quite steady year by year, but as long as the market [continues to] develop, we assume it will be an important growth factor for the insurance market, and hopefully followed by growth in private health insurance.”