Insurance market in Slovakia in the current era of digitalization
The Slovak insurance market has experienced a turbulent period in recent years. Its functioning has been largely affected by the COVID-19 pandemic, accelerated digitalisation and even climate change. How is the digital transformation of the insurance industry manifesting itself and what changes have occurred in the context of the digitalisation in the insurance sector?
The insurance market in Slovakia has undergone significant changes in the last two years, including a change in the structure itself, which has also been reflected in its financial indicators. Financial Stability Report from May 2022, prepared by the National Bank of Slovakia (NBS), mentions two trends: merging of insurance companies and the conversion of domestic insurance companies into branches from other member states..
The intensifying of these trends in 2021 was caused by three major events that took place in the insurance market. Union Insurance Company and Postal Insurance Company merged to form a new insurance company Partners focusing on risk life insurance and Generali and UNIQA insurance companies were transformed from domestic insurance companies into branches of Czech insurance companies. Generali merged with Ergo and UNIQA merged with AXA.
Profitability of insurance companies with extraordinary influences
In the mentioned Financial Stability Report, the NBS states that: “Return on equity (ROE) increased slightly year-on-year from 13.92% to 13.98% as of December 2021 and continued to be among the highest in EU countries.” Profitability of the insurance sector in Slovakia thus recorded a slight growth compared to last year, which was mainly due to the development in the non-life insurance sector, when insurance fees increased in P&C, accident, property and car insurance, partly due to traffic regulation during the pandemic. However, there have been a number of extraordinary impacts on the insurance market over the last two years that have had an impact on its structure and functioning.
As a result pandemic, insurance companies in Slovakia have been building up extra reserves in 2020, in particular for cases of insolvency of travel agencies caused by pandemic restrictions. This resulted in additional costs for insurers, which were ultimately lower than initially expected thanks to the measures taken to support travel agents. These extraordinary reserves were therefore released last year, which significantly reduced the expenditure of insurance companies by up to EUR 14 million. €.
The insurance sector has also been marked by a significant tightening of regulation, greater reporting obligationsand an increase in the tax and levy fees on insurance companies to almost 50%. and a new law introducing a new insurance tax. However, insurance claims are also greatly affected by climate change and the related expected growth in claims due to the increasing incidence of natural disasters, the military conflict in Ukraine, which is also expected to slow down the growth of the insurance market, or the digitalisation of insurance companies.
Digital transformation of the insurance industry
In recent years, insurance companies in Slovakia have been undergoing digitalization of insurance products, services and processes. It is the digital transformation of the insurance industry that has a large share of the dynamic changes in the insurance sectorthat have been greatly accelerated by the pandemic. This required the transfer of communication with clients as well as the conclusion of insurance contracts to the online space, and the related digitalisation of insurance products and services.
“Digital signing of insurance contracts, focus on sustainability, impact on reinsurance programmes and insurance products, greater demand for property insurance – these are areas we are paying huge attention to.”
Vladimír Bakeš, Chairman of the Board and CEO of Kooperativa Insurance Company
What is digitalisation?
Digital transformation can be defined as the process of introducing digital technologies to streamline existing processes, operations, work cultures and improve customer experience to increase resilience to new trends, growing customer demands and business challenges.
In order to meet the demands of their policyholders and remain competitive, it is essential for insurers to keep up withan era of digital transformation. This would require the digitalisation of various aspects of its operations, with a number of insurance products and services undergoing transformation.
The digital transformation of the insurance industry isdriven by artificial intelligence, automation, mobile, live chat and predictive analytics. It enables insurers to provide customers with exactly what they require in an era marked by digitalisation. Many insurance processes, including claims, have been automated and operations as well as interactions with customers are more efficient and faster, which is appreciated not only by policyholders but also by the insurance companies themselves.
What are the benefits of digital transformation for insurers?
First of all, digitalisation has made insurance possible tobe more effective. Almost every aspect of insurance operations primarily driven by artificial intelligence has been optimized for higher speed. Most requests can be handled in real time, even remotely, thanks to live chat or digital assistants that speed up customer service.
The digital transformation has also led to the personalisation of insurance products and services in order to meet the individual requirements and needs of customers. Digitalisation enables insurers to provide personalised services without overstretching its own resources. Digital technologies offer customers the possibility of immediate feedback and control of the status of claims handling.
Digitalisation has also helped the scalability of insurance companies. Thanks to digital technologies, they have adapted to current conditions and have become much more agile than in the past. Today, customers can access services and information much faster, for example through self-service information panels or apps. At the same time, insurers can collect valuable information about their clients in this way, which helps them to make more accurate decisions about underwriting, policy or new product development.
Last but not least, digital transformation increases the agility of insurers in an effort to make them more adaptable and efficiency in the context of continuous change and further development of insurance technologies and opportunities in the future. As a result, insurers are no longer dependent on the current situation, but are able to adapt effectively to market conditions.
The insurance industry in Slovakia has been determined by a number of factors and trends in addition to digitalisation. However, the digital transformation has caused its greater adaptability to constant change and the ability to keep up with new digital technologies and the ever-increasing demands of customers, who are already demanding the digitalisation of everyday life in the insurance sector. Thus, by digitising insurance products and services, insurers will be able to remain competitive and continue to provide high quality and modern services and move forward with the growing needs of their clients and the current situation.
The importance of digitalization in the insurance sector and the development of software for the insurance industry is also perceived by msg life Slovakia. We employ 250 employees, and you can be one of them. Join a leading IT company and participate with us in the development of innovative software solutionsthat are driving the world of digitalisation. See our job offers and create with us the future of the insurance industry.