Insurance market is growing and developing twice as fast as the entire Latvian economy as a whole. And that is good. Bad news: it is uneven development of the industry.
Already for a long time mandatory insurance of civil liability of motor vehicle owners remains unprofitable, similar situation may seemingly arise also with CNC insurance (comprehensive and collision insurance).
In just 9 months of 2016, Latvian insurance companies have signed premiums for 284.8 million euros. Increase in income from insurance premiums amounted to 5.2% in the first three quarters of this year. However, growth in insurance indemnifications was nearly three times more intensive: almost 16% compared to the same period in previous year. Total amount of indemnifications paid in the first 9 months of this year was 182 million euros.
Reduction in the margin between premiums and indemnifications is explained by tough competition reigning on insurance market, and that is why insurers are expanding the coverage of insurance policies. Accordingly, the indemnification payments are becoming higher and higher.
After a slight decline in the first half of the year, life insurance market has stabilized, demonstrating + 2% growth during the first 9 months. It is believed that the development of this type of insurance was hampered due to the instability of geopolitical and economic situation in Europe, which prevented businessmen and private clients from making decisions in the long term while life insurance is a service of long-term nature.
Nevertheless, in recent times the number of insured persons is growing faster. It is partly due to people who acquire a life insurance policy for a certain period (without accumulation of savings): their number increased by 31%. Thus, the number of signed contracts increased purely arithmetically; however, the policies themselves have become “narrower”.
Debates over introduction of compulsory health insurance (medical insurance) have become particularly violent in this year. The Bank of Latvia, an ardent supporter of this idea, explains its benefits mainly with the opportunity to raise additional funds, chronically lacking in health sector. What is important, such model could work in the long term and not depend on political situation.
These and other arguments, with all their validity, could not (at least until now) to convince top officials of the Ministry of Health, who consider the introduction of compulsory health insurance as “shifting population’ money into wallets of private insurance companies”.
Debates are fueled, then muffled, then reopened with renewed vigour while Latvians solve their problems, so to speak, on individual basis. It is revealing that among the largest types of insurance the highest growth in the number of premiums is observed just in the segment of health insurance (+ 12%). And just this type of insurance occupies the largest share on the market - 21% of all types of insurance.
It evidences that people - at the level of both legal entities/employers and private clients - are increasingly understand: if you’re ill, you’re on your own. Government helps them who help themselves.