Allianz Hungaria chief says 'superbond' is a mighty foe, insurer readying new home insurance product
You took over the management of the largest insurance company in Hungary from Péter Kisbenedek last year. How is your leadership of Allianz different from that of your predecessor? In what areas do owners expect Allianz Hungary to strengthen?
Our position is extremely strong, and as such we do not feel pressure to make urgent changes. We need to ensure that positive processes are maintained, and that we continue to progress on a similar path during the 5-10 years ahead of us. In addition to fine-tuning, we also need to talk about developments concerning the future: the expectations of our clients are changing, and we need to satisfy these with new services and new experiences. Maybe it goes without saying that these developments, both within and outside of the organisation, focus on digitalisation and streamlining.
Could you give an example?
We have conducted several surveys, and the results show that while clients still want to have options, they are not in favour of a too wide range of services, either. In light of these results,
in 2019 we introduced transparent home and motor insurance packages that provide basic protection, a wider range of coverage and a comprehensive protection.
We recognised that there is no demand for overly complex, fully customised insurance products. Compared to the earlier ‘Lego-type’, overcomplicated product structure, this represents a considerable simplification.
Regardless, we need to realise that customers are only getting acquainted with the new structure and this process takes time. We are preparing to implement thorough changes in service provision and continuing to accelerate client servicing. We introduced the option of remote claims assessment in the autumn of 2019, which – using the Allianz ConnX application via a mobile phone or tablet – allows the establishment of a live video connection in the claims assessment process. This enables our clients to share recordings of the damage incident with our experts online, conveniently at the time specified by them. In addition, we are offering a substantially more client-friendly, new-generation claims status tracking application to control the claims settlement process.
In this respect, insurance products are very similar to mobile phones as practically no one is interested in the underlying complex electronics, but everyone wants a simple, user-friendly and highly-operational interface.
To what extent will the new expectations transform the sales mix? Can the old sales channels be phased out and be replaced by new ones?
This is a fundamental strategic issue that has no simple answer. Certain existing channels require development, for example agents are still highly needed as many of our clients require cooperation based on personal trust. In addition, traditional channels are considerably more stable than the new ones.
However, we also need to pay heed to the call of new times: many of our younger clients and an increasing number of older customers are now using multiple channels in parallel. They search for and compare information online and purchase offline, or even the other way round. The world has become much more complex and we have to regularly reevaluate and further develop sales channels, just as our collaboration with partners.
While on the topic of banking partners, what happened to the long-term cooperation with Takarék Group? Has it definitively come to an end?
Takarék Group has been a key partner for many years and although we would like to continue this mutually beneficial cooperation, no final decision has been taken on the matter as yet. Talks are still ongoing.
In recent years, we have established a form of cooperation based on a regional agreement with UniCredit Bank as well, and we have also been collaborating with other banks. These partners greatly appreciate the synergies that have thus become available, as with the current low interest rate levels we are able to generate added value for both clients and banks.
The bancassurance business may continue to expand, and I am certainly expecting no decline in this particular segment. Most likely, its role will not be as significant as in Asia where bancassurance dominates in terms of sales, especially in the life business, but we are also heading in this direction.
You have held several positions at Allianz in this region, among others in Bulgaria, so you have an international overview. In your opinion, in which areas is the Hungarian insurance sector underdeveloped, backward and where does it excel?
Hungary is an attractive market, one of the most developed in the CEE. The economy is growing persistently, with a stable market and regulatory environment. These represent an ideal environment for the development of the insurance market. The wealth and value of the assets of households are increasing, consequently requiring greater protection, be that a home, a car or travelling.
In the field of digitalisation, we are able to implement a number of developments that have not really gained ground in other markets just yet. At the other end of the scale, we have health insurance products. There is still room for growth in this respect as clients’ needs and expectations are rising continuously. The healthcare service system does not just require more funds, but must also function considerably more efficiently, in a manner that supports clients.
Reportedly, private healthcare providers are looking to enter the Hungarian market en masse, but the current regulations are not in favour of this need for the time being. As an insurer, would you prefer to cooperate with private or public healthcare?
Both. The examples observed in various countries show a number of different models. The majority of developed countries have some sort of a combination of public and private healthcare in place, and all these models have their strengths and weaknesses. Consultations, discussions and debates must start regarding Hungary's future development model. Insurers should be involved in this co-thinking process and dialogue as we are the players that can help the market of healthcare services function efficiently, particularly in terms of cost-efficiency.
Which European model would you prefer?
We see great solutions in the Austrian, Swiss and Scandinavian healthcare systems alike. For instance, an identical level of basic care would be available to everyone, which in turn could be expanded with additional services according to individual needs against an additional charge.
Surprising as it may sound, the majority of people would sooner spend on home renovations or purchasing a new car than getting their health in order. People need to realise that healthcare services require trained staff and advanced technology, and this costs money.
In our year-end survey among CEOs of insurance companies, you also mentioned the need to increase insurance penetration. However, the Hungarian life insurance market has been losing significance not just relative to GDP, but also in the savings market. Do you consider this process reversible? If so, how?
This trend is attributable to the human factor. People’s priority is to protect their assets without risking even their smallest savings. The fear of loss is very strong. Raising awareness is also required in this respect:
those who are looking for higher yields must take on greater risk, while those who need increased guarantees must settle for lower expected yields.
On the other hand, if people want to make a profit on the capital market, they must accept the risks of both growth and decline.
As insurers, you must be able to compete with an instrument that guarantees households a nearly 5 percent annual return on a time-horizon of 5 years. How great a challenge is the competition created by the Hungarian Government Security Plus (MÁP+) bonds?
While the arguments I have mentioned before pose a theoretical problem, the high return on retail government securities pose a practical challenge.
MÁP+ is an attractive investment that has substantial siphoning effect on the market. This attractive low-risk yield is not available to institutional investors. Attaining a yield level this high without undertaking the related risks is a considerable challenge,
even if Allianz is one of the world's leading asset managers through Pimco and Allianz Global Investors.
Selling government securities represents a major challenge for insurers as well. For this reason, we are shifting from single premium insurance products to recurring-premium contracts. Retail government securities represent less of a direct competition for these contracts. This environment also makes the training and support of agents essential. We can provide accurate answers to even the most difficult investment-related questions posed by customers with the help of experts, who can provide the assistance needed with short deadlines.
In the wake of the MNB’s new rating, new home insurance products are expected to enter the market in the coming months. As one of the largest operators in the home insurance market, does Allianz acknowledge that the intervention by the central bank is justified?
Providing simpler and clearer products to clients is a good idea. At the same time,
I do not think the home insurance market was not sufficiently competitive.
In contrast with vehicle insurance, a relatively slow development is observed in the home insurance segment, meaning that the market structure inherited from the preceding system is also changing at a slow pace. Customers conclude home insurance contracts for the long term. We, of course, will also have qualified products and, in fact, this is one of the priority tasks for this year, and our experts are already working on drawing up our application documents.
The premium income from motor insurance is constantly increasing, but Allianz, as the traditionally dominant actor in the market, has almost everything to lose. How can you maintain your leading position? Or as competition is getting less fierce, is this becoming less of a challenge?
Despite the increase in prices, there is very tense competition in the market. I would again bring up the mobile phone market as an example, where despite fierce competition, devices are far from cheap.
5-10 years ago, the price of MTPL insurance products was artificially low, and this situation was not sustainable in the Hungarian market. This has improved since, but efforts are needed to retain our leading position. There is significant inflation in the car market, we need to satisfy ever-increasing technological expectations, and the costs of repair are also growing dynamically. Our market share in this segment had been dropping for years, but recently we have managed not only to stabilise, but also to slightly increase the share.
Several sectors are struggling with labour shortage and wage pressure in Hungary. To what extent is the insurance sector affected? Is Allianz expected to reduce costs for this or for some other reason?
This is one of the most critical and most sensitive subjects for us. It is a great challenge to find workforce – and for that matter, in sufficient numbers – with adequate expertise. In this respect, we must compete not only with other insurers, but also with other sectors, and even with other countries. We survey employee satisfaction annually, and despite getting very positive feedback, we cannot loosen up even for a moment, either in terms of retaining employees or recruiting the necessary staff.