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MTPL Insurance Market Liberalization Challenges Macedonian Case Setting MTPL Market Standards Towards Profitability PowerPoint Presentation
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MTPL Insurance Market Liberalization Challenges Macedonian Case Setting MTPL Market Standards Towards Profitability. Dr. Klime Poposki Alma Qamo Motor Insurance Conference Istanbul, March 2013. Contents. Macedonian Insurance market overview Benefits of a sound MTPL market liberalization

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MTPL Insurance Market Liberalization ChallengesMacedonian CaseSetting MTPL Market Standards Towards Profitability

Dr. Klime Poposki

Alma Qamo

Motor Insurance Conference

Istanbul, March 2013

contents
Contents
  • Macedonian Insurance market overview
  • Benefits of a sound MTPL market liberalization
  • Positive developments and challenges of MTPL insurance market in Macedonia
  • Setting up sound market practices in MTPL insurance market
    • Actuarial Risk Pricing standards
    • Reserving Standards and compliance benchmarks
    • Reinsurance Standards
    • MTPL Data Quality and effective Information Systems

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I.

Macedonian Insurance market overview

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Insurance market in Macedonia

15

Insurance Undertakings

4

Life Insurance Undertakings

11

Non-life Insurance Undertakings

23

Insurance brokerage companies

9

Insurance agencies

742

Insurance agents

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Structure of the Gross Written Premium

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Gross written premiums – relative change, MTPL

m EUR

Balkan countries

Macedonia

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Claims ratio, MI

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Channel distribution, MTPL

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II.

Benefits of a sound MTPL market liberalization

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benefits of a sound mtpl market liberalization
Benefits of a Sound MTPL Market Liberalization
  • Best price for consumers, based on risk characteristics;
  • Level-playing field / fair competition for market players;
  • Advantageous to more technically sound players;
  • Faster and better payment of claims to consumers.

Brings market stability, growth and confidence

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Is Macedonian MTPL market ready for liberalization?

Pros and Cons...

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positive developments in recent years good ground for mtpl liberalization
Positive developments in recent years Good ground for MTPL liberalization
  • Establishment of Insurance Supervision Agency, increased supervisory capacities and leading role in promoting insurance market development in Macedonia.
  • Law on Compulsory Motor TPL insurance in line with EU requirements;
  • Insurance Information Centre administered by the NIBM collecting market data and information useful for premium setting, reserving, detection of uninsured, fraud, etc.
  • Enhanced regulations and supervisory filing supported by web-based supervisory reporting system;
  • Combination of local expertise with practices of international groups with long insurance experience.

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market challenges reduced claims paying capacity
Market challengesReduced Claims Paying Capacity
  • Increased number of vehicles and insurance policies
  • Increased number of claims reported to insurers
  • Increased domestic inflation and costs of auto repairs
  • Increased cost of living and medical expenses

BUT

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market challenges increasingly inefficient and non profitable business
Market challengesIncreasingly Inefficient and Non Profitable Business

Considerable income goes to high commissions and other expenses

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insufficient claims payments and reserves from some mtpl insurers
Insufficient claims payments and reserves from some MTPL insurers

Companies with lower share of MTPL business pay and /or reserve more claims

Companies with large share of MTPL business in their portfoliopay and reserve less claims.

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uninsured vehicles
Uninsured vehicles
  • Decreasing tendency of uninsured claims number relative to insured , but still considerable
  • Severity of uninsured claims substantially higher compared to insured claims (uninsured claims comprise 6% in number and 12% in amounts of claims paid)

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overall effectiveness and profitability picture
Overall effectiveness and profitability picture

Questionable from under estimation of reserves! Can be higher!

1

3

4

4

<

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reaction of market post liberalization
Reaction of Market post Liberalization

Driven by level of industry development

Highly developed markets

  • High level of insurance expertise
  • Markets driven by experienced insurers and risk-based practices
  • Liberalization usually followed by immediate increase of premium rates (previously regulated) driven by actuarial risk analysis towards positive financial results
  • Step-by-step process in some countries to control effect of immediate premium increase on consumers.

Less developed markets

  • Inadequate level of insurance expertise and lack of risk-based standards
  • Inadequate capacity and improper practices of claims payment and reserving by some market players
  • Unfair “illegal” premium discounts from insurers, discriminating prudent players and distorting market standards and competition
  • Further “legal” decrease of premium rates may occur immediately after liberalization with major deterioration in claims paying capacity and solvency for insurers and market

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is the market ready to liberalize now
Is the Market ready to liberalize NOW?

Given the current stage of MTPL market development:

Immediate and unprepared liberalization is likely to lead to market instability, reduced claims paying capacity and profitability and may have a negative social and economic impact.

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towards a profitable mtpl market in macedonia isa initiative joint project with world bank
Towards a profitable MTPL market in MacedoniaISA Initiative Joint Project with World Bank

OBJECTIVES

  • Enhance market standards and develop technical and supervision capacities for actuarially sound setting of premium rates, technical reserves and proper risk management in MTPL insurance
  • Ensure compliance of the MTPL insurance market with
    • EU MPTL insurance legislation
    • Best international practices

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building blocks for a sound mtpl market liberalization
Building blocks for a sound MTPL market liberalization

Proper information and DATA processing

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roadmap towards a sound and profitable mtpl market
Roadmap towards a sound and profitable MTPL market

Premiums set by Insurers

Proper risk reserves

Proper risk control and transfer

Market Profitability and Solvency

TARGET

  • Develop and consolidate Risk Based Supervision
  • Minimum Claims Reserving Benchmarks
  • Risk Based Actuarially Set Premium Benchmarks
  • Risk control and transfer requirements

Transitional

  • Premiums fixed by MTPL insurance commission

CURRENT

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user friendly interactive actuarial tools developed
User friendly interactive actuarial tools developed

Actuarial Risk Pricing Tool

Simple Pricing screen

Extensive background actuarial risk analysis involved

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user friendly interactive actuarial tools developed actuarial risk pricing tool
User friendly interactive actuarial tools developedActuarial Risk Pricing Tool

1. Simple claims data input

2. Claims reserves assessed

Extensive background actuarial risk analysis involved with option to make choice on method based on pattern!

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Thank you!

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