The amount of insurance claims made in 2012 was up 18.2 per cent over the previous year, reaching €213 million, even though premiums collected dropped by 10.8 per cent to €303m, according to the Malta Insurance Association.
Most of the decline in premiums comes from a 19 per cent drop in life insurances.
The floods in September raised the claims in the general category by €2m, but there was a large increase in the number of claims made in the life insurance category, from €119m in 2011 to €147m in 2012.
Recovering from a 20.5 per cent shrinkage in 2008 as a result of the financial crisis, the life market experienced growth of 6.5 per cent in 2009 and a further increase of 16.2 per cent in 2010 but then fell 6.7 per cent in 2011. Only 8.6 per cent of life insurance policies are claimed because of death: just under half of policies mature while the rest are surrendered.
Health insurance grew by 2.2 per cent in 2012, following a contraction of 0.5 per cent in 2011.
The Maltese are less likely to take out insurance than their European counterparts and the trend is downwards, outgoing MIA president Matthew von Brockdorff explained. Insurance penetration in Malta dropped from 5.19 per cent in 2011 to 4.50 per cent in 2012, while the EU average was 7.6 per cent.
This is just one of the many challenges facing the industry, he explained, which will be discussed during the annual general meeting being held today, which is this year open to all sectors of the industry, including members of the Association of Insurance Brokers and the Malta Insurance Management Association.
Each sector has its own issues. The Government is currently reviewing its monitoring of non-EU residents as although they must have private health insurance in order to be eligible for residency, there are few checks on whether the policies are actually issued or renewed, he explained. This sector is seeing little growth, partly because the state’s service has improved so much, and partly because of affordability of the premiums.
“The challenge is the inflationary cost of medical care which is driving down profitability and increasing premium costs, reducing the attraction of private health insurance. The cost of drugs, technology and medical fees continues to go up – this is compounded by the fact that medical specialists are charging relatively high fees for inpatient care compared to our cost of living. The MIA encourages patients to get pre-authorisation from their insurers prior to undergoing treatment to prevent frustration further down the line. The industry will pay ‘fair and reasonable rates’ which are benchmarked against international fees – It has to be said that there are a number of specialties where Maltese specialists consistently charge more than UK ones!” he said.
Another issue that the MIA feels strongly about is pensions gap problem and it has met Finance Minister Edward Scicluna to lobby for decisions to be taken.
“The whole of Europe is talking about the shift in dependency ratios. If nothing is done, it will become a major issue and the sooner the better, as the longer the pensions gap is ignored, the more of a problem it will be. We believe that it is better for the Government to take incremental action than to do nothing at all,” he said.
When it comes to motor insurance, he said with pride that the large majority of all license registration renewals are being done through Transport Malta authorised insurers . It is also possible that in the future, transfer of ownership could also be done through them.
With the court caseload now standing at 27,000, the industry is also waiting to see whether mandatory arbitration will continue as they believe it a far more efficient way of resolving disputes.
Motor insurance fraud, which is estimated to account for between five to 10 per cent of all claims, is also being tackled in a more comprehensive way, with companies pooling information – as far as is possible given data protection laws – to ensure that there are not multiple claims, as well as to tag staged accidents and thefts etc as perpetrators tend to try this on with different insurers. The industry is also cross-checking information on the creditworthiness of those they suspect of fraud, as this is a strong indicator that there may be underlying problems.
“This is something that we are taking very seriously as it means that those who are honest are paying five to 10 per cent more premiums merely to cover the abuse of others,” Mr von Brockdorff said. “We will be meeting the Police Commissioner soon to see how we can be of assistance to them in their investigations.”
The association is also lobbying for a clearer methodology when it comes to calculating compensation for injury, something that has been raised in the past without resolution. However, he said that this Government appears to be looking at this issue with an eye to proposing legislation, as the current approach has in the past led to very different computations by the courts.
“We are after the certainty of methodology. If there is a yardstick, then insurers will be better able to calculate risk, whether for motor accidents or occupational ones,” he said, noting that another aspect that will eventually need to put into some framework is the concept of moral damages now creeping in, albeit haphazardly.
“The idea would be to structure this so that calculations can be made more accurately but at this stage we have no way of knowing what the final legislation might look like as it is still under review.”
Another problem is that of uninsured drivers. This is handled through a fund administered by the Motor Insurance Bureau, from a pool built up by motor insurers. In 2012, there were €100,000 worth of uninsured accidents paid for through the fund – but the total of outstanding claims runs into the region of €2.5m, another headache for the industry.
“I’ve been president of the MIA for two years and looking back, it is gratifying to see how much the council has achieved. This is a very important sector, worth over €0.5bn, which protects people from risk. I leave it to my successor to continue building on all that has been achieved in the past...” he said.