“Rzeczpospolita” website stated that sales of insurance unit-linked products decreased by 30 percent. According to the newspaper, the main reason of a lower interest in this kind of products is the reduction of commission paid by insurance companies to their intermediaries.
The website rp.pl informed that there are 20 percent losses in the entire sector of life insurance. In total, in the first quarter of 2016 the premiums amounted to 5.7 billion zł. Rzeczpospolita indicates several reasons for lower demand in the insurance sector.
Firstly, the reduction of commissions paid to insurance intermediaries. Some insurance companies were paying to their intermediaries commission amounting to even 100 percent of the first unit linked insurance premium. This caused irregularities in the market, including high surrender charges. As of beginning of 2016, upon entry into force of the new act on insurance and reinsurance activity, this element of sales process is subject to regulation.
The new act enforced timing of commission in the period of at least 5 years. Apart from that, the amount of surrender charge cannot exceed 4 percent. “This changed the game rules and made sales of such type of insurance no longer profitable for intermediaries” says Rzeczpospolita.
Decrease of unit-linked insurance contracts concluded in 2016 results also from other regulations concerning the sales process of such insurance products, in particular pro-consumer legislation. Insurance companies are obliged to examine the adequacy of the proposed product towards the client’s needs, his/her knowledge on the capital market and possessed experience in investment.
On the other hand better situation is observed in the sector of motor insurance. Sales of MTPL insurance increased by 20 percent, mainly due to the end of the price war and intervention of the Polish Financial Supervision Authority.
Increases are result of more effective activities of the supervision authority taken up in order to make prices more real and self-reflection of the major part of the market – says Marcin Kawiński, expert of Social Insurance Department of the Warsaw School of Economics.
However, the increase of sales is followed by the increase of payment of compensations by insurance companies, what makes insurance companies note noticeable losses, despite higher revenues. In the first quarter of 2016 insurance companies had to add over PLN 300 million to the sector of motor insurance. During the last 8 years the total technical loss under MTPL insurance amounted to PLN 5,5 billion.
Overall, in the first quarter of 2016 insurance companies recorded a profit of PLN 627 million – 40 percent less than in the preceding year. In the sector of life insurance the decrease amounted to 13 percent, and in property insurance – 80 percent. Under the tax on assets, insurance companies has paid to the state budged PLN 100 million.
