Severe competition on the Bulgarian insurance market
Experts forecast that the enforcement of the 10% flat tax rate over the bank deposits which took place on January 1 has its positive side as well. The new levy will make many Bulgarians to change their saving manners. The main reason for the record increase of the money in bank deposits is the high level of security and the high interest offered by the Bulgarian banks. The new tax will make the Bulgarians to look for other alternative ways of saving which also have a low level of risk and are very attractive. These are products offered by the insurance business, especially the investments in life insurance. The insurance companies are expecting an increase in the number of their clients in 2013. Besides, many banks are offering products, different from the usual term deposits such as life and retirement insurance policies.
What is the situation at the Bulgarian insurance market? The researches show that the low incomes and the uncertainty in Bulgarians about their future obstruct them to sign more insurance policies as compared to other countries from Eastern and Central Europe. In Bulgaria, only 11% of the people have a personal insurance and 46% of the Bulgarians have insurance on their property, sows data from the international marketing company GfK. A large number of home insurances were made due to the requirement of the Bulgarian banks for allotment of mortgage loans. This means that the number of the voluntary home insurances in Bulgaria is very low. When the credit crunch started, some of the life insurances were cancelled. People stopped to pay their installments and started to draw their money in advance in order to make pressing expenses.
Experts comment that the insurance business in Bulgaria lies on the mandatory insurance. The market is small and restricted and competition is severe. The total turnover of the national insurance market amounts to EUR 750 million only and there are 34 insurance companies functioning on it. Here is an interesting fact: the foreign insurance companies hold nearly 67% of the total insurance business in Bulgaria and over 90% of the life insurance business. The number of the insurance intermediaries is even bigger and amounts to 380. Despite the strong competition many foreign companies are still showing interest to operate as insurance brokers in Bulgaria. At the end of 2012 over 1500 insurance intermediaries applied for license. On another hand 24 Bulgarian insurance brokers operate on the European market. This is so, because nearly half of this business goes through the intermediaries, who receive good commissions. Moreover, nearly 80% of the car insurances are made by brokers.
The insurance market has been constantly shrinking over recent years. According to experts the main reason behind that is the huge world economic crisis. On one hand it restricts the incomes of the consumers and does not allow them to make many insurance policies. On the other hand they can not afford to buy new cars, homes and other assets subject to insurance. However, car insurance is the one that keeps this business still alive and brings higher profits for the sector.
Experts are optimists about the future of the insurance sector in Bulgaria. This optimism is not based on emotions only, but on the experience of the insurance companies gained during the transition period in Bulgaria as well as by their tempering in the fight for every customer in a very competitive environment.
The optimism is based also on the long history of this business in Bulgaria. The start of the insurance in this country was given 130 years ago right after the liberation of Bulgarian from the Ottoman rule. The first insurance companies were a Russian and American ones and started to operate in 1882 and 1887. The first Bulgarian insurance company was founded in the town of Russe (Northeastern Bulgaria) in 1890 and was name Bulgaria. This company was making the mandatory insurance of the state properties. Later the company expanded and started to operate on the foreign markets as well. It opened offices in big European cities such as Amsterdam, Paris, Berlin, London and Madrid. Its business developed rapidly and reached the town of Chicago (USA) and Alexandria in Egypt. The foreign companies are showing big interest towards the Bulgarian insurance market. Many Russian, Italian, English and French companies already have subsidiaries in this country.
Source: http://bnr.bg/
(15.01.2013)