Our role is to promote a healthy environment for the development of the insurance industry, Lino Ferris, Malta Insurance ­Association president, tells Sandy Calleja Portelli.

What is the role of the Malta Insurance Association?

The Malta Insurance Association is a non-profit making organisation that represents the views and common interest of all licensed insurance companies transacting business of risk situated in Malta. The members are responsible for about 800 employees apart from about 500 tied insurance intermediaries.

The MIA represents all 10 domestic Maltese insurance companies which operate in Malta, as well as nine foreign insurance companies transacting business in Malta through locally appointed agents. Although the number of foreign insurers has dropped off in recent years, new local insurance companies have filled the gap. Besides providing security to individuals and businesses in Malta, insurance companies contribute significant tax revenue to the state.

The mission of the association is to promote a healthy environment for the development of the insurance industry in Malta. By representing the common interests of insurers operating locally, we can express our views to government and other interested bodies.

We strongly believe that a healthy market is sustained by adopting professionalism and excellence and we encourage exchange of information and fair practice. We consider fairness, transparency and knowledge as vital guiding principles to our mission. The association therefore also looks into allegations of incorrect practices and endeavours to develop solutions to common problems.

We are also active members of the federation of insurance associations known as Insurance Europe, which consists of 34 member states and is based in Brussels. Insurance Europe represents undertakings that account for about 95 per cent of total European premium income of almost €1,100bn, employs nearly one million people and invests around €7,700bn inthe economy.

The local association also administers the Motor Insurers Bureau which undertakes the settlement of claims involving uninsured motorists. EU rules dictate terms which facilitate companies to recover claims across borders and we are therefore members of the Green Card Bureau. Until 2012, we administered the Bus Pool which is now in a run off position dealing with outstanding claims.

One would therefore appreciate the significant role within the local scenario of our association.

We are currently in discussions with Transport Malta involving new procedures to transfermotor vehicles and the renewalof boat licences online throughour members.

Discussions are taking place with the authorities on health insurance too. We are voicing our views following the publication of a bill on the introduction of the third pillar pension schemes. While we applaud the government’s initiative at tackling pension reform, we are still concerned about the manner of implementation as we feel that the fiscal incentives being contemplated are not enough to incentivise people to start saving for their retirement. Third pillar schemes will be on a voluntary basis and in my opinion, if we do not get this right, many people will be at risk of poverty in the future. The pension payable from the national insurance scheme will be eroded due to the rising cost of living and inflation. Retirement age will eventually be 65 years in Malta, whereas the rest of Europe is advocating 67 or even 70 years in certain countries. If we all wish to live comfortably during our retirement, we need to plan ahead, and the sooner we do, the better. We are part of Europe and we cannot continue to believe that we live in a sort of utopia.

How do you think the insurance industry can grow locally?

Insurance penetration – which is conventionally measured as a percentage of premium volume with regards to risk and commitments situated in Malta to the country’s gross domestic product – rose from 4.42 per cent in 2012 to 4.59 per cent in 2013. The EU average in 2012 stood at 7.6 per cent. So if one looks at these figures we are confident that the Maltese population will become more insurance minded and procure more insurance products in the future, in line with the rest of Europe.

Malta’s general insurance (excluding life products) penetration rate in 2012 amounted to 1.95 per cent when compared to 3.12 per cent in the EU. Premium derived from life insurance products in Malta amounted to 2.47 per cent of GDP in 2012 compared to a penetration rate of 4.5 per cent in the EU. The Maltese public may in the future look for investments in life policies to complement their pension allowance and there is therefore room for growth in this area.

Malta’s insurance premium per capita in 2013 stood at €782 compared to €727 in 2012, whereas the EU average per capita in 2012 stood at €1,843. In 2013 total insurance premiums in Malta amounted to €329.7m, an increase of 8.5 per cent over the total insurance business generated during 2012, which was €303.9m. However it is pertinent to mention that there was a decrease of 10.8 per cent from the 2011 figures which stood at €340.5m. The increase in total insurance premium in 2013 was mainly due to a sharp increase of 13.7 per cent in life insurance. Non-life insurance business in 2013 reflected a 1.9 per cent increase over 2012 figures.

Malta’s insurance premium per capita in 2013 stood at €782 compared to €727 in 2012, whereas the EU average per capita in 2012 stood at €1,843

General business is reflected in four main classes, namely: motor insurance at 47.1 per cent, health insurance at 16.2 per cent, marine at 3.9 per cent and other business at 32.8 per cent.

Motor insurance remains the most important class of non-life business in terms of premium volume, with a gross written premium of €64,380,960, accounting for 47.1 per cent of the non-life market in 2013 with 307,603 vehicles insured compared to 306,551 in 2012. This produced an average premium of €209.29 and €208.92 per vehicle respectively. We are experiencing a more modern, expensive and technically sophisticated motor fleet whereby the cost of repairs is constantly increasing.

Competition in this sector remains extremely aggressive and when taking into consideration ancillary expenses, including re-insurance costs, acquisition and administration, a number of local motor insurers must effectively be operating this class of business at a loss. I wonder how long this can be sustained.

Health insurance grew by 3.85 per cent in 2013 to €21.3m, mainly derived from a compulsory requirement for non-Maltese citizens working in Malta. In 2013 the number of lives insured under individual contracts accounted for 12,847 while 84,644 lives were insured under group schemes, most of them with limited cover. As one gets older, premium is normally pegged to the age of the insured, and unfortunately, it is a fact that the majority of citizens may not afford to pay for personal health insurance when effectively this is mostly required. This is another area where our association and government could work together and achieve long-term results which will also prove to be beneficial to the local health system.

In general business, the penetration rate of home insurance remains very low as unfortunately, locals are not insurance minded enough to protect their lifetime investment: their home and contents. With the recent spate of burglaries taking place, it is strongly advisable to seek insurance cover primarily for peace of mind. In May 2013 the local building industry was faced with a new legislation, namely Legal Notice 72 under the Building Regulation Act. Developers are now obliged to take out a compulsory insurance to protect neighbouring property from any possible damage they may sustain during development. In my opinion this was issued without consultation and it poses a number of difficulties both to the developer and the owners of the neighbouring property, as well as insurers.

There is always room for new products to be introduced locally, normally without having to reinvent the wheel, but following leading insurers in Europe.

Insurance companies often get a bad reputation from customers who think that insurers are happy to take their premiums but find any excuse to avoid paying out on claims. From your experience, is this fair criticism?

I have been involved in insurance for over 40 years and can vouch that insurers always adopt a fair approach based on the actual terms and conditions of the insurance contract.

A policy of insurance clearly stipulates the conditions and most of the policies are written in simple English so that clients can refer to the explanation contained in the policy. Customers are protected by various consumer directives and have a number of remedies in place to safeguard their rights. Complaints are inevitably raised and each company has a procedure in place to tackle these with the highest ethical standards of conduct and professional integrity.

From my experience, if matters are explained calmly to whoever feels that their rights have been breached, a common understanding of the situation is normally reached. In most of the cases claims are dealt with quickly and efficiently. Consumers are also reminded that if their expectations are not met after exhausting all avenues with the respective insurer, the matter may be reported to the consumer desk at MFSA or our association, and we would then intervene to clarify the situation. Members of the Malta Insurance Association have tackled over 150,000 claims during 2013 and when considering these figures, the number of complaints raised is hardly significant.

Competition is extremely intense and insurers do their utmost to provide customers with the fairest of deals.

Over the years companies and regulations have evolved to such an extent that it is important for customers to be treated fairly and given the information they require. Insurance companies have invested heavily in moving closer to the customers and understanding their needs.

The association also looks into allegations of incorrect practices and endeavours to develop solutions to common problems

Insurers are in competition to provide the best possible service, and the proof of the pudding is in the eating. Insurers are gauged when their services are needed following a claim. One of the most polemical classes of business remains motor, with 46,744 claims reported during 2013. Unfortunately, very few drivers admit that they were liable following a motor accident, and in spite of advice given by experienced claims handlers, clients tend to insist and litigate matters. Our association has issued its members a handbook of best practice for motor claims, known as the drivers’ fault chart. This is available on our website and it explains how liability is determined following an accident. The purpose of this handbook is to ensure that claims are handled fairly, promptly and customers are aware of their rights and obligations following an accident.

If consensus is not reached between the parties involved or their insurers, cases may be referred to arbitration where an experienced court expert would hear evidence and then determine liability so that insurers can settle damages accordingly. Relatively few cases end up in court. I would like to mention that insurers are dependent on reports issued by traffic wardens or the police, most often supported by photos of the site of the accident and depicting the extent of damages sustained by the vehicles involved in the accident. With the aid of this facility, claims handlers are able to determine liability and explain to our customers the real facts of the case.

An international insurance conference was recently organised in Malta. What was your role?

We are members of Insurance Europe and, as members, we are represented in discussions together with other countries and associations much larger in size than ours. This year, Insurance Europe chose Malta to host its annual conference which brings together several hundreds of insurance practitioners from all over the world. It was a well-attended event addressed by Prime Minister Joseph Muscat. This was an important milestone for us as we strive to build and maintain visibility with the public. Although ours is one of the smallest insurance industries in Europe, we attracted to our shores one of the most important annual insurance events. Guests were impressed with the beauty of our country and the event was considered a great success.

If an insurance company is declared bankrupt, are consumers protected in any way?

The recent international financial crisis has had a negative impact and there are various schools of thought which argue how such crises should be avoided in the future. We have been hearing about the implementation of new regulations known as Solvency II which aims to review the prudential regime for insurance undertakings in the EU. Solvency II directive codifies and harmonises the EU insurance regulation: primarily this concerns the amount of capital that EU insurance ­companies must hold to reduce the risk of insolvency. The application date of this new regime has been set as January 1, 2016.

Local indigenous insurance companies have been gearing up for this development and I believe that all local licenced insurers have passed the stress test required by the regularity body MFSA. In the unlikely event that a local insurance company becomes insolvent, there is in place a fund known as the Protection and Compensation Fund which is sponsored by local licensed insurance companies.

If the insurer that becomes insolvent cannot meet its obligations, the fund kicks in to protect the policy­holders, naturally within the terms applicable by the relative legislation.

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