The Hungarian insurance market and insurance legislation

1
The Hungarian insurance market and insurance
legislation

• By dr. József Banyár,
• EU counsellor (insurance),
• Hungarian Financial Supervisory Authority
• Portoro, 25 November, 2004

2
The Hungarian Insurance Market
Main characteristics

• fast growing

• dominated by non-life branch

• saturated

• concentrated slow consolidation

• dominated by foreign companies (big
  multinationals)

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(No Transcript)
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30 joint-stock companies (98,1) 36
associations (1,9)
Only 1 joint-stock company is fully Hungarian
owned (11), and in another is considerable
Hungarian share
There are some new player, but their prospects
are limited
Some smaller (in Hungary!) companies recently
left Hungary and sold the Hungarian subsidiary to
other players or new entrants
It seems some EU companies will open branch
office and one company will convert itself into
branch office
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Market concentration the share of the 5 largest
companies in premium
100,00
100,00
90,00
90,00
80,00
80,00
Life
70,00
70,00
60,00
60,00
50,00
50,00
Non-life
40,00
40,00
30,00
30,00
20,00
20,00

10,00
10,00
Companies
0,00
0,00
1998
1999
2000
2001
2002
2003
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Market situation - problems
There is no insolvent insurance company the
average solvency margin is twice as much as the
statutory minimum
Fierce price-competition in the car liability
insurance market danger of insolvency in some
cases
Too many insurance agents on-line registration
from 15 December educational requirements
Too high cost component in savings-type life
insurance products
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The Hungarian insurance regulation (e.g.
investment, solvency, insurance mediation)
basically follows the EU directives and Hungarys
obligations from international treaties (OECD).
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A new Insurance Act is in force from 1 May 2004.
This is now completely EU-conform

• We are preparing ourselves for new directives, so
  actively participating in the subcommittees of
  CEIOPS e.g.
• Solvency II.
• Reinsurance
• Guarantee schemes
• Insurance mediation
• Occupational pension

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Specialities - planned changes
Compulsory fact-finding and policy illustration
in the process of life insurance selling from 1
of May
We are planning to reduce the technical interest
rate to 2,9 from 2006
Educational requirement for insurance mediators
from 15 December (200 hours for brokers, 160
hours for agents)
4 years interim period
We are considering to tighten the disclosure
requirement during the life insurance selling
process
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Reasons
The industry employs many new agents
unskilled high fluctuation
Commission-competition amongst insurers for
agents
result increasing cost-parts in life premiums
paradoxical the result of competition
increasing prices (in life premiums)
explanation special market the competition
is first for the agents and only after for the
client
Complaints unskilled selling (disregarding the
clients needs, unit-linked as current account),
low surrender value (especially at the
beginning), tomb-stone policies
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Possible disclosure requirements
to show the client the exact commission the
agent will receive on the policy ( compulsory
fee based compensation of brokers) and/or
to show the client the exact cost component of
the life insurance policy and/or
to show the client a kind of IRR about the
profitability of its savings-type life insurance
policy
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Thank you for your attention!