In today’s low interest rate climate, those in the insurance industry are waking up to a shift in consumer attitudes. In the Czech Republic companies such as Komerční Pojišťovna (KP) have been quick to capitalise on a market that has taken some heat in the past.
“KP remains cautious with regard to the current situation on the financial markets and low interest rates, and pays attention to asset management”, says the firm’s Chief Executive Stéphane Corbet. “Of course we would welcome the revival and improvement of conditions in the markets, but at the same time we are still able to offer attractive products with an attractive appreciation to our clients.” In the Czech Republic, there has been an increase in awareness to protect assets. While on a European scale, many Czechs still remain relatively reserved, changing attitudes are giving rise to more favourable conditions for the insurance sector, provided firms are quick to adapt to the changing climate.
[C]hanging attitudes are giving rise to more favourable conditions for the insurance sector
“We can see gradually increasing financial literacy of the population that is also driven by financial institutions”, says Corbet. “Pure sale of financial products is no longer the main objective. Today, banks, insurance companies, building saving companies and others from financial sectors focus mainly on providing quality financial advice.”
KP’s long-term strategy centres on customer service and on boosting its presence as a company capable of offering attractive products and related client advice. “KB Group, including KP, invests considerable resources and capacity in developing financial guidance and education of their clients and sellers. Clients may for example create their own long-term financial plan with recommended products, including insurance, thanks to the newly created application ‘MojePlány’”, says Corbet.
Utilising niche practices
Speaking on the hot topic of endowment insurance, and a tendency among local providers to drop the product altogether, Corbet believes it holds disadvantages for clients when interest rates are as low as they are. “After deducting the costs of the insurer, it brings almost no or negligible yield to the clients”, he says. “Endowment insurance does not allow any change of insurance settings or a creation of capital value.
“Unit-linked life insurance is a better solution in this regard”, says Corbet. “When selecting a suitable investment strategy it is possible to achieve really attractive returns, plus it is more flexible than the endowment insurance, because you can continuously change the parameters set at the beginning of the insurance and a type of investment strategy, as well as the extent of insurance coverage. It also allows partial withdrawals, which is not permitted in endowment insurance for the entire duration of the contract.”
In backing unit-linked life insurance as a fitting solution for the current climate, KP has recorded the highest growth in single-premium life insurance in the Czech market. In the first quarter of 2014, KP ranked first in the Czech life insurance market, measured by volume of written premiums, according to Czech accounting standards, with a total volume of CZK 6.8bn and a market share of 17.8 percent.
Guaranteeing investments
The figures, compared with the first half of 2013, have increased by CZK 2.6bn, mainly due to the life insurance for premium clientele Vital Premium (CZK 2bn) and unit-linked life insurance Vital Invest (CZK 0.5bn). “This success is mainly given by the long-term supply of guaranteed appreciation, which competes with current rates of deposit products. In the past three years KP credited appreciation of 2.7 percent, 2.3 percent and two percent, all per annum”, says Corbet.
“Clients are very interested in unit-linked life insurance, especially the Guaranteed Appreciation Fund within the insurance at Vital Invest and Broucˇek. At the time of unstable financial markets and low interest rates, people want mainly safe investment products with a guaranteed yield. KP was able to customise products to these needs and to offer attractive yield despite the difficult market conditions. In the first quarter of 2014 the volume of written premiums in product Vital Invest grew year on year by half a billion CZK.”
By keeping a close eye on the issues affecting Czech consumers and the various pitfalls of a low interest environment, KP has quickly become one of the country’s most trusted insurance providers and a pioneering name in the industry.
