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The idea of creating a mutual insurance co-operative in Bulgaria started in the autumn of 1996, when the first 36 insurance contracts were then concluded in December of that year. At that time, there was no specific law on insurance, though in the beginning of 1997 such a law came into force and gave notice to existing insurers that they were to adjust their activities according to the new requirements and acquire licences.
Going back to early 1997, there were 127 Bulgarian companies operating in the Bulgarian insurance market. However, in order to comply with the new laws we ourselves reorganised in March 1998 into 662 individual co-operators and, in August 1998, obtained a licence to carry on life insurance activities under the name Medic-Center Mutual Insurance Co-operative (MCMIC), with our registered office and headquarters in the city of Veliko Tarnovo. Over this period, more than 100 companies withdrew from the market.
In 2005, MCMIC decided to co-operate more closely with the Confederation of the Independent Trade Unions of Bulgaria (CITUB), changing its registered headquarters and its name to Sindikalna Vzaimno Zastrahovatelna Kooperacia (SiVZK), meaning Trade Union Mutual Insurance Co-operative (TUMICO). Fast-forward to today, and the co-operative works among all strata of the population, although it focuses primarily on workers hired on labour contracts.
Our main product for the last 18 years has gone through various iterations of distribution and channels for sale, names and calculus bases, but was always clearly distinguishable
By the end of 2014, the members of TUMICO numbered at 31,483, yet the participation of investors in TUMICO – classed as legal entities – is strictly prohibited by law. All policyholders are served by 17 employees and new contracts are concluded by four employees, out of which three persons are highly qualified and one is in the process of training. The knowledge that underwriters of TUMICO must have is, in volume, about 1,000 pages of different fields of insurance and common matters.
The biggest challenge for TUMICO, concerning the national insurance market, is collecting the initial premiums of candidates for insurance and promoting the benefits of mutual insurance in Bulgaria. Globally, a fair and equal European legal framework for all insurers in Bulgaria is not only our dream, but an aim that, together with our partners, we are working to achieve.
Simple and minimal
Many managers advise companies to change and rethink their goals. We at TUMICO, however, defend the opposite idea. We preach product simplicity and universality, and abide by three basic principles: a clearly distinguishable main product, a continuous effort to maintain a business model, and the application of this business model in all projects.
TUMICO is also hostile towards the idea of fragmentation; the formula of ‘simplify and repeat’ is most appropriate for us. We believe there are numerous ways to implement this model, namely by targeting more clearly defined groups of customers with a certain social status. Our efforts are aimed at the average person, and we promote the ‘lenten’ management system, meaning any job position or activity that does not create added value and/or new production is unnecessary, unless required by law. Simplicity is a useful tool against the growing complexity of corporate structures. Businesses have a natural tendency to grow and complicate.
To manage globalisation, companies are using complex matrix systems of management, hiring experts to develop new technologies and organising a number of meetings that stress employees. According to TUMICO, this is a hidden killer for this overly complex type of business. To avoid this, we strive for more simplicity. Though it is more easily said than done, TUMICO permanently adheres to the mantra of simplicity. Our main product for the last 18 years has gone through various iterations of distribution and channels for sale, names and calculus bases, but was always clearly distinguishable.
The role of the chairman is to simplify the complexity of the business and adhere to the basic principles and policies of the business. However, we believe that the simplicity of the concept is not enough, and we pursue the following obligatory and indisputable business practices: rejuvenation of staff, education of TUMICO’s own talents, concentration of all resources advocated by AMICE, and solving complex administrative tasks with small groups of highly qualified specialists.
Risky business
The new century began with a strong emphasis on raising public awareness of the risks, as well as the fragmentation of the business and personal life of every citizen. Life without risk is impossible and, at a very basic level, people have realised that they can better meet the dangers that their environment serves if they are in groups with others. Uncertainty is most often defined as doubts about the favourable outcome of a given situation. In practice, there are many definitions and categorisations of risk, but to clarify the purpose of our marketing concept we should specify that there are pure and speculative risks.
We find the dialectical relationship between the two types of risks to be an important issue that should distinguish corporate entities. Mutual and co-operative insurance in Europe today shares a fair few differences and is generally different from JSC insurance. Mutual insurance continuously increases the qualitative and quantitative components of its products and does not target corporate profits, while Bulgarian MICs are forced by the Insurance Code to capitalise unnecessarily, without regard from the legislator that solvency is guaranteed by the legal form of the existence of the insurer. Co-operative insurance and reinsurance aim to make a profit, but they are allowed for members with voting rights and investors, which mainly capitalise the insurer, while for Bulgarian MICs this is prohibited and capitalisation for supporting solvency is required.
The main difference in the character of the current two types of life insurance in Bulgaria arises from the ownership of capital. Corporate ownership is measured by unambiguously determining the holder of one’s and/or other insurers’ own funds. In MICs, the holders of the funds are themselves the insured persons, whereas in JSCs this is an independent group of entities. For shareholders, it’s clear that the main criterion is speculative risk, because the optional investment process (unlike for banks) makes the prospects for success extremely tempting, especially in the implementation of conservative management of pure risk insurance.
Such an approach in an MIC is meaningless and absurd, and is most clearly illustrated by the following scenario: compensations are paid conservatively in order not to harm the legal entity (MIC) and pay corporate profits to the insured that have suffered, though only if they are among the living, because the prevention that they expected payment for did not take place due to the mixing of two radically different ways of life insurance imposed by law.
It should be noted that TUMICO includes in its general conditions an opportunity for the prepayment of insurance sums, with a view to protecting the insured, which, in itself, is an accurate expression of the corporate nature of MICs. In time, this approach should serve to induce changes in the Insurance Code, mostly in line with the Solvency II Directive, and taking into account our experience gained from our contacts with AMICE.
Maintaining a reputation
The reputation of the insurer is our first concern. Reputation is hard to build and easy to lose. We are all responsible for building and maintaining our reputation and we strive to continuously improve the quality of our work by acquiring new knowledge, conducting self-assessments, learning from foreign experience and understanding the importance of preserving and sharing accumulated knowledge.
We share a certain responsibility for the work we perform, for the protection of information obtained and the property of TUMICO, to comply with the rules of conduct and business communication.
We work in an environment of mutual trust, encourage different opinions and communicate openly. We believe that the contribution of our colleagues is critical to our overall success and we are respectful of the efforts made by each one of us. In TUMICO, the pursuit of process optimisation and improving the performance of employment duties are encouraged. Also encouraged are innovation, creative ideas and solutions, and any reasonable initiative.
Opportunities for continuous learning and improvement are evaluated, searched and applied. Periodic evaluations and self-assessments of practices applied in the workplace are carried out. Internal and external expertise is collected and evaluated systematically, and the results of the evaluations are used to improve the quantitative and qualitative parameters of the work done.
Every employee strives for continuous improvement and performs their duties competently, responsibly, in good faith and without interfering with others. The employees of TUMICO realise the crucial importance of high competence and personal motivation to preserve the uniqueness of the insurer and strive to maintain their level of training and development in line with the best world achievements in this area.
