After three quarters of 2020, the life insurance market in Poland, measured by gross written premium, was worth PLN 15,395 million, meaning that over the most recent 5 years it contracted on average by 3.6% per annum. At the same time, the premiums collected during the three quarters were 3.1% lower than those in the corresponding period of 2019. This resulted principally from the evolution in the single premium business in investment products. Gross written premium in periodic premium products has increased both in life insurance (class I) and in accident and illness insurance (class V).
* based on tables „Technical Account of Life Insurance Companies by Insurance Classes”
Source: KNF, Quarterly Newsletter. Rynek ubezpieczeń [Insurance market] 3/2020, Rynek ubezpieczeń 3/2019, Rynek ubezpieczeń 3/2018, Rynek ubezpieczeń 3/2017, Rynek ubezpieczeń 3/2016
The changes in the level and the growth rate of the life insurance market premium in recent years have been stimulated mostly by single premiums in investment products. Similarly, the premium contraction for the overall market year on year pertained to single premiums (down PLN 825 million, i.e. -24.1% y/y, compared to -17.0% in the previous year). 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 a trend over several years. The low interest rates and the tax on short-term endowment insurance products with fixed or index-based rates of return, which was introduced in 2015, contributed to the declining interest in those investment products and caused them to be gradually withdrawn from offer (mainly the fixed rate products). In subsequent years the guidelines of the regulatory authority, including those regulating the level of fees charged to clients of unit-linked products, as well as EU directives regulating the market for unit-linked products and their distribution led to insurance undertakings constricting their offering of these types of products, especially in cooperation with banks. After three quarters of 2018, the first sudden decline in single premiums was recorded (-31.7% y/y, of which -41.3% in the area of investment products) which was followed by downward movements in subsequent years (-24.1% after three quarters of 2020).
The outcome of this market evolution was the expanding significance of periodic premium that constitutes PZU Życie’s competitive edge on the market. During the three quarters of 2020, premium with this payment form was 2.6% higher compared to the same period in 2019, with a cumulative average growth rate of 1.1% for the last 5 years. Despite the declining periodic premium in unit-linked life insurance (by PLN 197 million y/y), the premium in protection products in classes I and V continues to trend upward (PLN +511 million y/y), in both group products (PLN +170 million y/y) and individually purchased insurance (up by PLN 117 million y/y).
At the same time, market concentration measured by the periodic gross written premium remained high. During the last year, the sequence of the four largest market players has not changed and their combined share rose to 71.2%.
The total technical result generated by life insurers in Q1-Q3 2020 was up PLN 176 million (+6.9% y/y) from the corresponding period of 2019 to PLN 2,718 million. An increase occurred only in the accident and illness insurance class (class V) – by PLN 352 million (+24.1% y/y). It resulted from an increase in net earned premium with a simultaneous decline in claims and benefits (the impact of temporary social isolation due to the pandemic and therefore lower accessibility of medical services).
In this same period, life insurers generated a net result of PLN 2,175 million, representing a PLN 114 million (5.5%) increase y/y. This is the effect of the technical result being better than in the corresponding period of 2019, with a simultaneous unfavorable impact of investment performance realized on insurers’ free funds.
The total value of the investments made by life insurers at the end of Q3 2020 was PLN 42,259 million, signifying a 4.8% growth compared to the end of 2019. However, the high level of claims paid out, which exceeded the level of contributions to funds led to a lower net asset value of life insurance in which the policyholder bears the investment risk (down 5.9% to PLN 46,141 million).
PZU Życie’s activity
Within the PZU Group, PZU Życie operates on the Polish life insurance market. 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:
|Life insurance market – gross written premium vs. technical result||1 January - 30 September 2019||1 January - 30 September 2020|
|PZU Życie||Market||Market net of PZU Życie||PZU Życie||Market||Market net of PZU Życie|
|Gross written premium||6,351||15,887||9,536||6,519||15,395||8,875|
During Q1-Q3 2020, PZU Życie wrote 42.3% of the gross written premium of all life insurers on the market, signifying further growth on top of last year’s market share (2.4 p.p.). The reason for the increase is the higher level of single gross written premium than a year earlier (both among protection insurance products and investment insurance products) with a decrease in the share of other market participants (mainly in the unit-linked life insurance class).
At the same time, PZU Życie continued to be the leader in the periodic premium segment. the first three quarters of 2020, it generated 45.6% of these types of premiums, signifying a small decrease (by 0.3 p.p.) in the market share in this segment as compared to the previous year. The rate of increase in gross written premium at PZU Życie in this segment was 2% y/y, while the other market players taken together posted a 3.1% growth rate. One of the major factors was the rapid growth in the portfolio of health insurance (class V) and individual protection insurance (class I). PZU Życie had nearly 2.2 million health insurance policies in its portfolio.
PZU’s share in just the life insurance segment (class I) for periodic premiums at the end of Q3 2020 was 59.7% when measured by gross written premium and 64.2% when measured by the number of contracts in force. In turn, PZU’s market share in terms of the method of entering into an agreement just in the life insurance segment (group vs. individual) was 64.9% for group policies and 41.8% for individual policies (measured by gross written premium).
Groups: Talanx - Warta, Europa, Open Life; VIG - Compensa, Vienna Life; Aviva - Aviva, Santander-Aviva
Source: KNF, Quarterly Newsletter. Rynek ubezpieczeń [Insurance Market] 3/2020
PZU Życie’s technical result represented more than half the result earned by all life insurance companies. This evidences the high profitability these products enjoy. PZU Życie’s technical result margin on gross written premium was 1.7 times higher than the overall margin generated by other companies offering life insurance (23.3% versus 13.5%).
PZU Życie, as a popular and the largest insurer on the Polish market, continuously expands its offering by adding new products or modifying existing ones to protect its clients at each stage of their lives. The unique synergy of competences within the PZU Group (insurer, medical operator, investment manager) allows the company to comprehensively take care of life, health and savings of its clients, providing them with the broadest possible support in accordance with their expectations and needs.
The changes in the offering take into account the new requirements of the regulatory authority and the growing extent of statutory consumer protection. The 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. They also enable the client to take advantage of various contact channels to reach the insurance undertaking (e.g. in a branch, by phone, e-mail, Internet client account, person providing technical insurance services in the workplace or through an insurance intermediary, whether tied or external).
Under group and health insurance, PZU Życie took the following actions in 2020:
Each of these riders may be extended to include medical services, among others consultations with specialist physicians and rehabilitation;
PZU Życie’s efforts in the area of individual protection insurance and protection and unit-linked insurance:
Thanks to the new cover and the numerous changes introduced over the past dozen or so months, PZU’s individual life and health insurance offer has become one of the broadest and the most competitive in the Polish market.
In individual pension insurance, the PZU IRSA (Individual Retirement Security Account) insurance has been modified to adapt it to the new regulations effective as of 1 January 2021. From this date, the IRA and IRSA Act introduced a new amount limit for persons who conduct non-farming business activity.
These person may pay into IRSA up to 1.8 times the average forecasted monthly salary in the national economy for the given year. Other clients may pay into IRSA up to 1.2 times the average forecasted monthly salary for the given year.
PZU Życie cooperated actively with 4 banks, including the PZU Group’s banks, continuing the roll-out of a comprehensive offering using the banks’ distribution networks. The cooperation with Bank Pekao and Alior Bank allows PZU Życie to gradually expand the offering and volume of sales of insurance products linked to bank products. In 2020, life insurance for borrowers of Alior Bank’s mortgage loans was launched.
In the case of unit-linked products, sold by Bank Millennium, Bank Pekao and Alior Bank, promotional fees were offered to clients, which increased the attractiveness and competitiveness of the offer in the market. For the time of the pandemic, additional functionalities were launched in the self-service channels, facilitating client access and servicing of concluded agreements.
Factors, including threats and risks, that may affect the operations of the life insurance sector in 2021
The main risk factors include: