Ministerial commissioner: a regime change is needed in the life insurance market

Zsolt Kovács, Ministerial Commissioner of the Ministry of National Economy, spoke mainly about the self-provision market:

• the insurance sector performed well in the crisis years, as shown by the Solvency II capital adequacy of around 200%, the double-digit growth last year (Hungarian Insurance Associtation [MABISZ] adjusted premium revenue +12.7%), and the profitability was maintained even with the HUF 88 billion extra profit tax, the economic downturn did not cause turbulence, there were only "storms",
• the household savings rate declined after the Covid years, but this reversed in 2023, and savings trends in Europe and Hungary are clearly positive: Hungarian society is saving rather than consuming,
• according to an internal survey, among those who cut back on consumption, nearly 70% of Hungarians said that they would give up consumption to increase their savings, and that they would prefer to increase their savings even if their income situation improved,
• since the end of 2022, we have seen a boom in government bonds and mutual funds, with HUF 4,782 billion of inflows into savings last year, but life insurance and pension funds only contributed 5% of this.

  Last year was a huge opportunity for the savings market, but funds and insurers failed to make the most of it.

• life insurance started to go downhill in 2008 and pension funds from 2011, and in the last four years combined they have only received as much money as in 2007 alone,
• the underperformance of pension funds is clearly due to weak sales potential,
• there is less and less saving for self-care, and regular forms of saving have been pushed into the background,
• the ethical life insurance concept introduced by the MNB in 2016 has brought cost transparency, lower total cost indicators (TCI) and fewer customer complaints, but the fact that there are fewer intermediaries is also a matter of concern,
• the Netherlands provides a stark example of why a government should not restrict or ban commissions, since the market saw a significant drop in premium revenues there
• the MNB's ethical 2.0 concept also risks that there will be fewer sales and fewer people benefiting from self-care, so it should be introduced with caution.

According to Zsolt Kovács,

an "unorthodox Hungarian way" should be found, a regime change should be made by rethinking the status of consultants, because it is not certain that a cheap product is a good product if nobody buys it.

According to Zsolt Kovács, we need more and better mediators, because Hungarians still do not understand the importance of the long term, and we need to be able to explain this. The "regime change" he spoke about may also involve changes in legislation and funding.

Cover photo: Ákos Stiller / Portfolio