Top Manager in Discussion: Othmar Michl, CEO of Uniqa Biztosító
Although major fields in the insurance business are facing difficult conditions, Uniqa CEO Othmar Michl tells The Budapest Times that he has managed to keep his company in the black again this year by choosing the right focus, adopting an appropriate incentive policy and uncompromising quality management.
Othmar Michl, CEO of Uniqa Biztosító: “At the beginning of the year we concentrated more strongly on life insurance. The results can be seen even now. While the market leader ING saw a decline of 15 per cent, we have managed to achieve growth of 19.6 per cent in this area.”
How are things in the insurance industry?
Still not particularly good. While the insurance sector in 2009 recorded profit of HUF 66 billion (EUR 224.46 million), last year it made a loss of HUF 3.3 billion (EUR 11.22 million). That was due in part to the higher than average number of claims caused by storms and flooding, and in part the special tax on financial service providers introduced last year. This year again the sector will be a long way off its 2009 result, and in fact the sector will probably make a loss once more.
You have been largely spared natural disasters so far this year.
Yes, but two important markets, cars and housing, are still performing badly. While 210,000 new cars were sold in 2008, this year it will be 45,000 at most. On this greatly shrunken market there is a fierce battle for market share. The construction sector presents a similarly bleak picture: while there is an estimated need for around 120,000 housing units yearly, this year only approximately 10,000 housing units will be completed. Just take a look out of the window! You can barely see any construction cranes against Budapest’s skyline.
How will your insurance company be affected by the planned VAT rise from 25 per cent to 27?
Both in terms of the costs of insurance and claims payments, amounting to as much as HUF 1 billion (EUR 3.41 million).
How are you managing to stay in the black despite his difficult environment?
By shifting our focus appropriately. At the beginning of the year we concentrated more strongly on life insurance. The results can be seen even now. While the market leader ING saw a decline of 15 per cent, we have managed to achieve growth of 19.6 per cent in this area.
How did you manage that?
Partly thanks to the good performance of our roughly 1,000 sales employees – we were able to increase our productivity by 23 per cent in this respect – and partly thanks to products that are evidently very well tailored to the needs of the market. We are anticipating further dynamic development in this field in autumn.
Isn’t it difficult to sell long-term financial investments in such times?
On the contrary! I have been working in the insurance business since 1973. Independently of Hungary I have observed that the inclination to save in economically difficult times is more pronounced than in times of prosperity, which favours consumption more strongly. I would, however, like to see the state offering more tax support to citizens making their own long-term arrangements for their financial security.
How have you been able to offset weaker performances in the car and home insurance fields?
We have also focused on the sale of health insurance. That has also been successful. This year one in two customers who took out private health insurance in Hungary did so with Uniqa.
That proportion is well above your market share. What is your secret?
As with life insurance, we have been successful by offering products that are exactly suited to the needs of insurance holders. They are also optimally adjusted to the particular features of Hungarian healthcare. In this field it was also helpful to be able to rely on the expertise of our Austrian parent company, a market leader with around 50 per cent market share, in putting together our offers. Health insurance requires a lot of specialist knowledge. Unlike with vehicle insurance, relatively few insurers in Hungary deal with health insurance. There are around six large suppliers that do so.
How has your business year been so far?
It has been particularly successful in terms of life insurance and health insurance. It has been a successful year despite the difficult circumstances in compulsory motor insurance, where we have lost market share and premiums are at rock bottom.
How is that possible? When I interviewed you a year ago you remarked that there is no way to get around insurance mathematics.
I still stand by that. The show’s not over yet. So far this year has been relatively low in claims. Owing to the massive rise in fuel prices, the number of kilometres driven has fallen drastically. We also had a relatively mild winter. Both have meant a lower number of claims, which means so far those practising dumping are still doing OK. The insurance company MÁV Biztosító – which went under two years ago – also did well for a time: but once garages start insisting that they will only hand over repaired cars in exchange for cash because they are afraid of their costs not being reimbursed, it is mostly too late, however.
Is the incredible pressure to reduce premiums when it comes to compulsory motor vehicle insurance typical of the region as a whole?
No, not at all. In Poland, Romania, Slovakia, the Czech Republic and Croatia the premiums are in some cases considerably higher than the Hungarian ones. Here in Hungary switching to an even cheaper insurer has almost become a sport. Sometimes people will change to save less than HUF 1,000 (EUR 3.40). That "game" is driven by the internet brokers, who have made identifying and changing to the cheapest supplier very simple. All the large insurance companies have lost out in the short term: in this market Allianz has lost around HUF 8 billion (EUR 27.21 million) in premiums, Generali has lost around HUF 6 billion (EUR 20.40) and we have lost around HUF 2.8 billion (EUR 9.52 million). For customers it is far from certain that what currently looks like the cheapest insurance will also pay off in the medium and long term.
How can the downward spiral be halted?
Partly by the insurers themselves. If customers have more than one kind of insurance with an insurance company and that loyalty is rewarded by the insurance company, there is less inclination to switch just because of minor price differences. That is precisely the consideration that lies behind our multi-partner programme. On average our roughly 500,000 customers have 1.7 insurance deals with us. That is well above the market average but there is plenty of room to increase that number. The spiral can be broken in the longer term, however, above all by the purchasing power of citizens increasing again.
At the end of August you were named "Hungary’s Best Insurance Company" in the building of the London Stock Exchange at the World Finance Insurance Awards 2011. What impressed the jury in particular?
Our very good financial results from the past year and the innovative nature of our insurance and financial products were named specifically. Our first euro-based unit-linked products with guarantees were also praised. The award is a nice recognition and encouragement for my colleagues and I. It shows that we are on the right path and that others have also recognised that. The award also gives our customers clear confirmation that they have chosen the right insurance company. However, much more important than awards are ultimately the results of customer surveys and GfK (market research) analyses. During a mystery shopping performed at 123 of our offices recently, we received top results in 97.2 per cent of cases. It is reassuring to know that we are well set up across the country. In a study of 21 investment portfolios a few weeks ago we received 19 "best performer" grades, while the remaining two portfolios were in second place. I was also very pleased that we were recipients of the Superbrand Award for the fifth time this year. We also won "Best Call Centre Hungary". As you can see, we are up in front when it comes to awards relevant to our company. That isn’t going to change. This evening [22 September] we will receive the "Money Moon Award" for best performer in the investment of life insurance funds.