As a result of growing trends and digitalization, the insurance sector in the CEE region is developing quickly. In this article, we will look at how digital innovation and insurtech are affecting how insurance products are distributed, as well as the rules and data that are relevant to all of this. Automation and artificial intelligence (AI) are increasingly being used in insurance companies as the business develops. However, these adjustments also bring with them difficulties, such as navigating the regulatory environment and having access to crucial data. This article seeks to inform and educate on the current condition of the industry and where it's headed in the future as the CEE area quickly catches up with the rest of the globe in terms of digital innovation in the insurance industry.
Emerging Trends and Regulatory Perspective
Despite the epidemic, 25 billion euros were invested in a European Insurtech start-up market last year. In 2021, 13 of the Insurtech agreements took place in the product development space. There are nine on underwriting, 53 on distribution, and seven on claims. All these investment opportunities must become a reality and a success. The financial services law must be innovative and digitally friendly. To be appropriate for the digital era and stimulate digital innovation, it must be technology-neutral and future-proof. Unfortunately, there are still regulatory impediments to offering insurance to customers online. For example, the paper requirements utilized by the insurance distribution director are valuable to mention here. The simple conclusion is that the more specific the regulatory standards, the better.
In the end, the more precise the regulatory requirements, the more difficult it is for the financial sector to innovate. Another example is the GDPR, where some of the regulations create legal ambiguity and hinder the use of blockchain technology. Second, regulatory criteria for new service providers entering the market, such as Insurtech start-ups, are frequently less stringent than for those already in the market. In terms of access to data and data monopolists, creating a level playing field among all these stakeholders—insurers, new market entrants, start-ups, and major IT giants—will be critical in the future. Improving data access, processing, and sharing regulations in order to foster innovation and competitiveness.
As per Alexandru Ciuncan, the CEE market rose by 8% in the first half of 2021. The number of claims paid increased by 5% in the first half of 2020. Motor liability has also increased in several Romanian markets. Moving further into the area, motor lines dominate the CEE market. In conjunction with the motor hull, they account for more than 35% of the business. While life insurance accounts for 30%. The claim's portfolio reflects the market structure. Life insurance accounts for 41% of all claims paid, while car insurance accounts for 36%.
The regional top five remained the same in 2020, with Poland, the Czech Republic, Hungary, Slovenia, and Romania continuing to lead the way. This is the most important aspect of client feedback, even if we lack concrete statistics for all nations. The COVID-19 epidemic caused a surge in the amount of insurance obtained by customers throughout the year. There are various variances across nations, but this is likely to be true throughout the CEE area. Consumer interest in health, household, and life insurance is growing in Romania. Most likely, the result of COVID-19 is.
In the first half of 2021, the Gross Written Premium in the 17 CEE Countries covered by XPRIMM Insurance Report Magazine increased by more than 8%. This is the most recent information available. Claims increased by 5% compared to the first 12 months of 2020. This is primarily due to extreme weather events. It is crucial to note that various markets in Romania have seen a surge in automotive claims, particularly Motor Third Party Liability (MTPL).
Moving deeper into the area, Motor Insurance, sometimes known as motor hull, and MTPL dominate the CEE market. They stand together and account for more than 35% of the business, while life insurance accounts for 30%. This market structure is replicated in the Claims Portfolio, but in a different proportion: 31% of all claims paid in the 17 CEE markets covered by these publications are for life insurance, whereas only 36% are for motor insurance.
In terms of dynamic Gross Written Premium, all 17 markets were examined in the second year, which was during the COVID-19 pandemic, and they found a favorable dynamic. Seven of the seventeen markets exhibit positive dynamics with double-digit growth, and one can wonder what the primary driver was.
Property insurance, owing to the influence of extreme natural hazards; motor insurance, again in the Romanian market, and life insurance, in Poland, Hungary, and the Czech Republic, were the key drivers that registered the most significant rise. Poland, Hungary, the Czech Republic, Slovenia, and Romania are among the top five largest markets in the CEE Region.
Customers nowadays want convenience, quickness, and self-service alternatives. As a result, industries are working to meet their expectations, with mobile apps, virtual appraisals, and a recent Deloitte report highlighting that the pandemic has accelerated plans for claims transformation, and in fact, the number of caregivers noted that the percentage of claims are handled virtually and digitally, especially in the year 2021, during COVID-19.
Technological improvements tend to be one of the most important drivers of automation, particularly in the case of low-value and high-frequency claims. Experts identified two significant areas for the future of claims management in the case of low- and high-frequency claims. This is especially true for home insurance, travel insurance, and automobile insurance. We anticipate a high rate of automation over the next 5–10 years, with procedures such as claim notification and settlements becoming totally automated. There are already remedies in place. However, these solutions will become more common. While human interaction will most likely continue for these minor, low-value, and high-frequency claims.
While human interaction is required for these minor, low-value, high-frequency claims, human interaction will most likely be limited to checking the system's output. The second tendency pertains to substantial losses, high value, and low-frequency claims on the corporate segment. Here, it appears that the procedure will remain more or less like what it was previously, but the human touch will be crucial since things are simply too diversified to be taken over entirely by technological solutions. However, the influence of digitalization will be seen here as well, since more and more public databases will be utilized to quantify risk. Various technologies will be employed for large-scale risk inspections. For large-scale risk checks, many technologies will be deployed.
It is obvious that CEE insurers took significant measures to prepare for the trend. But we also encounter problems. It is difficult to gain access to some information, such as databases, that are supplied by authorities, and we all want countries to have greater access to public databases so that we can better understand the risks to which we are exposed. In CEE, these data either do not exist or cannot be freely accessible; if they do exist, they are in an internal, paper-based format, making search and automation difficult. When considering the prospects, it can be observed that the CEE started with digitization in the insurance industry later than the rest of the world.
Looking at the potential, the CEE started with digitization in the insurance sector later than in more established nations and markets, which is a big example for us, our sectors, and, most importantly, our clients.
Preparing for the Next Major Disruptor – A Look into Emerging Trends and Predicting Future Risks for the CEE Region, a keynote presentation by Alexandru Ciuncan at the Claims CEE Summit on 27-28 January 2022
Regulatory Perspective on InsurTech in the CEE Region, a keynote presentation by Alexandru Ciuncan at the Distribution CEE Summit on 24 March 2022