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Peace of mind

There are various advantages of having peace of mind and someone taking care of your needs, says Alfredo Muñoz Perez, Mapfre Middlesea Group CEO.

Locally, how has insurance penetration developed in recent years?

This depends on whether we are talking about non life or life business. Over the last years, non life premiums have increased very steadily (marginally, at an annual rate of about two per cent between 2008 and 2013) and generally below GDP growth rate. The exception was 2014, the only year where the increase was significant, at seven per cent.

The effect of increased demand and awareness has to some extent been offset by price competition. Penetration for 2014 was 1.94 per cent of GDP, still low when compared to other countries in Europe. On average, the rate in EU countries was 3.1 per cent one year before.

Alfredo Muñoz PerezAlfredo Muñoz Perez

On life business, the situation is different. There have been years of growth and decline, since the bulk of premiums correspond to investment products (either with profit or unit link types), and sales depend much more on the products’ attractiveness when compared to other alternatives such as government stock and deposits and on the return achieved in recent years.

Even though 2014 was a satisfactory year in terms of sales, our penetration is still low at 3.15 per cent of GDP and far below the 4.58 per cent in EU 2013.

Overall, including life and non life, premiums at 5.09 per cent of GDP compare quite poorly with 7.68 per cent in the EU. In actual monetary terms the situation looks worse, with €910 per capita, compared with more than double (€1,883) in our benchmark.

Are local consumers and businesses becoming more insurance minded, in line with the rest of Europe?

Customers’ awareness is slowly increasing but this movement must intensify – and I believe this will eventually happen – to approach European standards. Many clients are highly price-sensitive or even have a view that insurance has to be bought because of a legal obligation or bank requirements, not due to representing an added value for them.

Maybe the insurers are partially responsible for this, since we have been unable to communicate a well-structured value proposal, based on services rather than on pure financial coverage that we invoke in few instances. Sometimes catastrophes or other events remind people that they had better be covered. But beyond these cases, we need to change the minds of Maltese consumers and make them conscious of the advantages of having peace of mind and someone taking care of their needs. Increasing levels of available income and changes in lifestyle should drive us that way.

How is Mapfre Middlesea catering for growth?

Our group can offer integral coverage in all classes of business, both life and non life. We have a comprehensive range of products with added value features such as assistance, contact centre based services, and a very highly valued loyalty scheme. This range increases year after year with new input, sometimes following experiences in other markets, that can benefit our local clients too.

To introduce our products we count on the most varied and extensive distribution network in Malta, in which we invest heavily, giving channels the tools to develop and a level playing field which allows them similar opportunities – the choice of the intermediary belongs to the client, not to us.

Moreover, customers can have trust in the company itself, because of financial strength, shareholder support, enhanced controls and other values.

In recent years, how have lifestyle changes fuelled the introduction of new insurance products?

Nowadays, people have less time available and are more demanding than before. Therefore, service providers must increase their quality procedures and make life easy for their clients. This is where the service component of our offer comes in: enabling people to report a claim 24x7, receive professional attention at home in case of an emergency, and have accessible offices with parking facilities. Meanwhile, the digital revolution is underway and insurers will have to develop completely different service models. We have to innovate continuously or we will be out of business.

Customer needs will be especially high for some classes: life insurance will develop more because of financial needs brought about by retirement, health insurance will flourish as the population will demand more and more, and public systems will not have enough capacity to cater for this increase.

Has the growth of the financial services sector made the insurance market more competitive?

The local insurance sector has become gradually more and more competitive, mainly in non life classes – this is a consequence of internal forces. Most of the new entrants in Malta operate in external markets and have little impact in local market dynamics. Nearly all local players have been operating for a good number of years, but it is getting tougher to be in business, to properly serve your customers and to comply with heavy regulatory requirements. This means that most probably concentration will take place.

Mapfre Middlesea recently announced its acquisition of Allcare Insurance. What business advantages does this acquisition give you?

The acquisition of the business of Allcare Insurance gives us access to a relevant book of clients that can be developed with new products and services, and to intermediaries that will complement well our current network. It is also a way of optimising structure and capital utilisation. A bigger portfolio gives an advantage to gain internal efficiency.

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