The Hungarian subsidiary of the Austrian UNIQA insurance company established its Corporate Business division, which deals with large companies (at least 300 employees and insurance value of HUF 1 billion (EUR 3.51 million)), a year ago. The division has been led by Mihály Jankovich, an Austrian with Hungarian roots, from the start. The Budapest Times spoke to him about the new division’s first business year and about general trends on the market.
How has the division developed?
We have reached our targets and will even exceed them slightly. Overall we have been able to achieve good results. We have succeeded in being accepted by customers as a partner in this field within a short time. Naturally we are helped by the fact that UNIQA has had a good name in Hungary for years. The greater challenge comes now in our second business year, when we aim to clear a bar that we have set ourselves. In the medium term we want to advance from our current place on the market. In any case, it is clear that it was a strategically sound decision to create such a division.
How did your division come to be established?
Our insurance company was previously predominantly active in personal insurance and automobile insurance and continues to be very successful in those fields. In 2011 there was a change of management at the parent company in Austria, with a relatively young team coming to the top. One of its first measures was to identify where we are not yet optimally positioned outside Austria and where there is still potential for growth. The field of corporate business was swiftly targeted and local units were set up. A new unit was created in Austria that is tasked with providing support centrally to the local units. That puts us in the position to rival even large competitors from Germany and the USA.
Is it not a disadvantage that your company has focused on this new field so late?
On the contrary. In the past many companies covered their risks with international policies. In some cases large country groups were treated en bloc. It was not uncommon for risk protection in Eastern Europe to cover a region from, say, Poland to Kyrgyzstan, although the given countries naturally form very different risk groups. A lack of differentiation naturally led to higher prices for customers. That explains why international companies are increasingly departing from that en bloc concept and prefer to work together with various local experts. That reorientation very much favours UNIQA, which is well positioned in Central and Eastern Europe – our home market – and has a stable background. Thanks to our strong local expertise we can take a considerably more customer-focused approach and develop more tailored solutions than globally present insurance companies. While we have set up this division relatively late, the timing is just right to take advantage of the current trend. There is another advantage in the fact that we have only established our corporate business division now: we are starting out with sensible risk evaluation. Other insurers that have been active in this segment for some time, when it was not so important to have top risk management because the economy was flourishing, are having problems now. At a time of decreasing premiums, those companies will win that are good in underwriting, that are best in examining and estimating insurance risks, and setting suitable premiums. It is also a question of having a balanced risk portfolio. That balance makes a good insurer.
Did you have to start from scratch in this field at your company?
No. We were already well on the way in fleet insurance, for example. We also had several contacts to large company customers that we can take advantage of now. It is just that previously we did not have a dedicated large customer unit. However, naturally even now we are putting a lot of effort into acquiring new customers. Recently, for example, we insured a bio-ethanol producer and a tyre producer. A year ago we would have avoided such industrial risks.
How is the situation on the market?
Since we chiefly insure industrial risks in the corporate business field, naturally we are feeling the effects of the stagnant economy. However, there are also companies, such as firms producing for export, that are not suffering from a poor business climate. This is not a good time for companies producing for the domestic market though. The construction and transport industries are particularly hard hit, according to the signals that we are getting from our customers. On the other hand we are also sensing that companies are becoming significantly more risk aware at a time when revenues are not as abundant as in the past. That is a positive development for both sides, even if it is sometimes to the detriment of premium levels, simply because those responsible at the companies have become more commercially astute in insurance matters. For example, companies, in order to reduce insurance premiums, are increasingly taking on certain risks or partial risks themselves in the form of co-insurance. Firms more and more only transfer those risks to insurers that they cannot manage themselves because of the amount or the complexity. In good economic times it was much more common for companies to take out full insurance, without co-insurance. Companies protected themselves even against risks that, with better management, they could have borne themselves. At a time when companies are dealing more intensively with risks, good advice is essential. It’s important to put yourself in the position of the company taking out insurance, to put your heads together and to work out which risks the customer really needs to have external insurance against.
What about the competition?
There is strong competition among the relatively small number of providers – in our segment we are speaking about 10 insurers at most – which results in a certain price pressure when it comes to premiums. Luckily in this field the price wars are not as ruinous as, for example, in third-party motor vehicle insurance.
What are the main pillars of your business division?
Essentially there are four key areas: property insurance, various types of third-party insurance, motor vehicle insurance and, increasingly, fringe benefits in the form of insurance for employees. Property insurance should be structured to ensure that the property and the continuation of the business are secured. Third-party insurance is designed to cover damage to a third party. That includes not only damage of an operational kind but also damage caused by a company’s own products. That is particularly important if you are exporting to certain countries like the USA.
What kinds of insurance do employers typically grant to employees?
As fringe benefits employees are typically granted accident insurance, health insurance or life insurance fully or in part. We have seen particular interest in health insurance, not least because services in state healthcare are still relatively poor. Extra insurance can be used to compensate for that deficit and in effect give employees the status of being privately insured. Employee insurance is a good way to reduce employee fluctuation and to top up wages in a way that is more favourable to the employer in terms of taxation. Recently many benefits in kind have now been taxed by the state to a degree that they are no longer attractive to employers. Luckily that is not yet the case with insurance for employees. We have received an increasing number of inquiries about such products. I would advise all employers to check whether they can perform the next wage rise in full or partially through offering insurance to the employees concerned.
What are the taxation conditions like for your company?
Third-party insurance has been taxed since last year. All other types of insurance – except for life insurance – will be taxed from next year. I can understand why taxes are being levied in insurance. In other countries insurance taxes of a similar order of magnitude have been normal for years. I was even surprised that insurance has not been taxed more heavily until now. There was no question that there would be such a move in Hungary sooner or later. The only doubt in my mind is whether the time for the introduction of insurance taxes was well chosen. The new taxes will be partly passed on to consumers and domestic demand is already under pressure. By the end of the year the special tax, which we are also affected by, will be cancelled for financial institutions. Essentially there will not be a further burden for us – the burden will simply shift.
How do you see Hungary’s future economic development?
2012 has not been an easy year. Many insurance companies are eating up their reserves. It is not surprising that some insurance companies, including big-name ones, are seriously thinking about leaving the Hungarian market. Of course UNIQA is not among them. We will definitely remain. Our company has decided on Central and Eastern Europe. We are pursuing a long-term strategy here. My hope is that in 2013 the reforms undertaken will gradually have an effect and bring about a certain degree of economic growth. It would be good if we would again see a climate that favours investments and growth. I am not anticipating highly dynamic growth but even the first signs of such growth would make a big difference.
Mihály Jankovich (age 51) has been involved in insurance of business customers in Central and Eastern Europe for over 20 years. From 1990 to 1993 he was in charge of international customers at Gerling Konzern Kft. He then held the position of managing director at insurance broker Risikoservice until 1997. From 1997 to 2006 he was managing director of Aon Magyarország Kft. and from 2007 to 2011 was managing director of Vienna International Underwriters GmbH. Since October 2011 he has been head of the corporate business division at UNIQA Biztosító Zrt.