Poland’s life insurance market in Poland measured by gross written premium was worth PLN 18,293 million in the first three quarters of 2017 meaning that over the most recent 5 years it contracted on average by 7.6% per annum. At the same time, gross written premium in Q1-Q3 2017 was 2.7% higher than in the corresponding period of the previous year, signifying the first year-on-year increase after 4 consecutive years of a downturn in the life insurance market, spurred predominantly by single premiums in products of an investment nature.
The evolution in the level and the growth rate of the life insurance market premium in recent years has been prompted mostly by single premiums in investment products. Attention should be drawn to the fact that the premium expansion for the overall market year on year in the first three quarters of 2017 pertained to single premiums to a greater extent (up PLN 446 million, i.e. 8.0% y/y). The growth rate for the corresponding period of 2016 was negative at -34.1%.
Life insurance market – gross written premium (PLN million)
|1 January - 30 September 2017||1 January - 30 September 2016|
|Gross written premium||PZU Życie||Market||Market net of PZU||PZU Życie||Market||Market net of PZU|
|Periodic premium||5 617||12 259||6 642||5 501||12 225||6 724|
|Single premium||753||6 034||5 281||496||5 588||5 092|
|TOTAL||6 370||18 293||11 923||5 997||17 813||11 816|
Gross written premium reported by life insurance undertakings in Poland (PLN million)
The single premium cumulative average growth rate in the period under analysis was -17.0%. The changes in circumstances on the capital market and in the legal environment should be considered to be the underlying causes for the gross written premium on single premium business to fall in recent years. The record-breaking low interest rates contributed to the declining profitability of what are known as term deposits packaged as insurance products (polisolokata in Polish), thereby stimulating greater interest in other investment products. Moreover, as of 1 January 2015, a tax was implemented on short-term endowment insurance products offering a fixed yield or a yield defined using an index; this also contributed to constricting client interest in these types of products and ultimately to their retraction, especially of the former, from the insurance undertakings’ offering. In subsequent years the regulatory authority’s guidelines, including guidelines regarding the level of fees incurred by clients of unit-linked products led to insurance undertakings constricting their offering of these types of products. Last year’s improvement in the condition of the equity market facilitated higher sales of unit-linked products, especially ones offering a single payment. This involves clients re-allocating funds among various products, thereby reducing the fees charged for surrenders. This upswing was observed primarily in the bancassurance channel.
The outcome of this market evolution over several years was the expanding significance of periodic premium that constitutes PZU Życie’s competitive advantage on the market. In Q1-Q3 2017, periodic premium was 0.3% higher compared to the same period in 2016, with a cumulative average growth rate of 0.7% for the last 5 years.
The total technical result generated by the life insurance undertakings in Q1-Q3 2017 was up PLN 239 million (11.0%) from the corresponding period of 2016 to PLN 2,418 million. This improved performance was caused by higher profitability, especially in life insurance (class I) and accident and sickness insurance (class V) – these classes recorded y/y increases in their bottom line of PLN 133 million (28.7%) and PLN 96 million (7.4%), respectively, driven largely by lower acquisition expenses with a concurrent upswing in revenues, including from deposits, and a lower value of benefits disbursed in class I.
In this same period, life insurance undertakings generated a net result of PLN 1,859 million, representing a PLN 115 million (6.6%) increase y/y. This improved result was, to a large extent, the effect of better investment performance recorded by insurers than in the corresponding period of 2016, both in terms of investments used to cover liabilities under technical provisions and the insurance undertakings’ available funds.
The value of the investments made by life insurance undertakings at the end of Q3 2017 was PLN 41,913 million, signifying 2.6% growth compared to the end of 2016. In turn, these positive investment results contributed to a higher net asset value of life insurance in which the policyholders bear the investment risk (up 4.4% to PLN 59,507 million).
Life insurance market – gross written premium vs. technical result (PLN million)
|Gross written premium vs. technical result||1 January - 30 September 2017||1 January - 30 September 2016|
|PZU Życie||Market||Market net of PZU||PZU Życie||Market||Market net of PZU|
|Gross written premium||6 370||18 293||11 923||5 997||17 813||11 816|
|Technical result||1 245||2 418||1 173||1 201||2 179||978|
PZU Życie’s activity
PZU Życie SA (PZU Życie) does business on the Polish life insurance market on behalf of the PZU Group. The company offers an extensive range of life insurance products, which for management purposes are reported and analyzed broken down into the following three segments: group and individually continued insurance, individual insurance and investment contracts.
During Q1-Q3 2017, PZU Życie wrote 34.8% of the gross written premium of all life insurance undertakings, signifying further growth on top of last year’s market share (+1.1 p.p.). The expansion of PZU Życie’s market share was driven by a higher rate of growth in gross written premium on a y/y basis than that of all its competitors combined, both payable periodically and in the form of a single premium.
At the same time, PZU Życie continued to be the clear leader in the periodic premium segment. In Q1-Q3 2017, it generated 45.8% of these types of premiums written by insurance companies, signifying growth of 0.8 p.p. in the market share in this segment and the highest market share level since 2010. The growth rate of gross written premium at PZU Życie was 2.1% y/y in this segment, compared to the negative growth rate posted by the other market players who reported an outcome of -1.2%. One of the major factors in this respect was the rapid growth in the health insurance portfolio. PZU Życie now has nearly 1.5 million policies of this type in its portfolio. From the outset of 2016, KNF has also been publishing data making it possible to depict as a matrix PZU’s share in just the life insurance segment (class I) for periodic premiums. After Q3 2017, this share was 65.7% when measured by gross written premium and it was 72.9% when measured by the number of agreements in force. For this same group of risks, the market share split by the method of execution in the period under analysis was 68.3% for group agreements and 40.4% for individual agreements (when measured by gross written premium).
Life insurance undertakings - percentage of periodic gross written premium in the first three quarters of 2017 (%)
PZU Życie, a well-regarded company and the largest insurer on the Polish market, continuously expands its product offering by adding new products or modifying existing ones. Changes in the product offering are intended to attract new clients and expand the insurance cover for those already in the portfolio, along with strengthening their loyalty and increasing their satisfaction level. Concurrently, the changes in the offering take into account the changing requirements of the regulatory authority and the growing extent of statutory consumer protection. It should also be pointed out that in many cases such changes are made not only to the product itself but also entail the modernization and simplification of the way in which insurance is offered and sold (processes and front-ends) and enable the client to take advantage of various contact channels to reach the insurance undertaking (including in person in the branch, by phone, by e-mail, via the newly deployed client account, via the person providing technical insurance services at the workplace or through an insurance intermediary, either a tied one or an external one).
Under group and individually continued (protection) insurance, the following major changes were made in 2017:
In the area of health insurance, PZU Życie’s product offering in 2017 was focused on addressing to the largest possible extent the needs of specific client segments, creating solutions enabling an easy inclusion of health insurance agreements to PZU Życie’s existing client portfolio, seeking unique market solutions and looking for new strategic partnerships on the market with a view to preparing specialized solutions for specific client groups. Among the solutions that were prepared, the following ones may be distinguished (in addition to the health insurance products described in Section 3.7 MEDICAL SERVICES (HEALTH AREA):
In the area of unit-linked insurance, the following changes, among others, were introduced in 2017:
Factors, including threats and risks, that may affect the operations of the life insurance sector in 2018
The following constitute the major risk factors on the life insurance market in 2018: