Claims Paid Exceed Insurers’ Revenues

Claims Paid Exceed Insurers’ Revenues

Claim payments for acquisitions and early liquidations of life insurance programs exceed premiums collected each year.

As results in the study of the Hellenic Association of Insurance Companies, compensations paid by the companies in 2013 amounted to 1.8 billion EUR, when the sector’s premiums amounted slightly lower, at 1.7 billion EUR. In the non-life sector, claims paid amounted to 900 million EUR, representing about one third of premiums collected, when total premiums amounted to 2.3billion EUR.

Although the amounts paid each year for claims or early redemptions come from reserves held by the insurers and are not financed by industry’s yearly revenues, for the life sector claims explosion at the level of premium income, undermines the development of the sector and comes in line with the downward trend and the spate of liquidations, recorded in recent years.

Contrary is the picture of the car sector, which, despite the reduction it has suffered, records a parallel reduction of compensations paid. Thus, in 2013 the compensation for bodily injury and property damage accounted for 54.5% in premiums, from about 80% in 2009, returning the sector to profitability. The reason was the reduction of car accidents due to reduced car use, a development that indeed allowed price reductions in premiums.

The decline of  life insurance operations from 2.5 billion EUR in 2009 to 1.7 billion EUR in 2013 -the decline has reversed in the first ten months of 2014 – has led to a decline in per capita premiums, ie consumption expenditure of Greeks for insurance. In life insurance the amount was reduced from 222 EUR in 2009 to 147 EUR in 2013. The reason is the fact that a large number of insured either canceled their insurance program or reduced their coverage benefits in an effort to keep their contract.

Reduced were the per capita premiums of non-life. The sector is monopolized mainly by spending on car insurance premiums. This amount fell from 261 EUR to 204 EUR in the same period, while the aggregate per capita premium, ie the cost for both life insurance and for non-life insurance, fell from 483 euros to 351 euros. The underinsurance of Greeks is also reflected in the comparative figures for per capita premiums in the other European countries, according to which the expenditure per capita in life insurance in 2012 amounted to 1,083 EUR (Greece: 170 euros) and the industry in general 760 EUR (Greece: 217euros).

Despite the recent shrinking of private insurance, the industry has shielded its financial position, by improving its capital base and profitability. After the blow of funds because of PSI, their equity rose to 2.2 billion EUR from 986 million EUR in 2011 and 1.7 billion EUR in 2009. Respectively, after the successive losses caused by the impairment of Greek bonds in 2011 and 2012, the industry returned to profitability in 2013, recording 548 million EUR in profit.

Click here for the Greek article.

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