Results of “The Best Annual Report 2011” announced

For the seventh time the Accounting and Tax Institute announced results of “The Best Annual Report” competition, rewarding the best annual report in 2011 according to the IAS and IFRS. The competition was organised under the patronage of the Polish Insurance Association.

This competition has only winners as even the fact of participation in it clearly shows that a company’s management board aims at pursuing a transparent information policy – and this is one of the greatest added values of “The Best Annual Report”. Moreover, each of the participating companies receives a detailed evaluation spread sheet with notes from the Competition Jury members, which helps to improve the Annual Report year after year. In this way, the Accounting and Tax Institute wants to fulfil an educational function. Up to date experience indicates that a number of companies which followed the advice of the Competition Jury moved up in the rankings – from low positions to receiving honourable mentions and awards.

This year, a good example of the above-mentioned process is the annual report submitted by PKN Orlen S.A. Annual reports of companies which took part in the competition for the first time (such as PZU S.A.) and the companies still preparing for their debut (such as Bank Pocztowy S.A.) are also worthy of note.

Four years ago we added another category to our competition, “The Best On-line Annual Report”. Not all public companies understand that nowadays Internet is the fastest information source and, similarly as in the paper version, the annual report published on-line should constitute a useful source of information both for the shareholder and the investor. In other words, its specific content should be presented clearly, taking advantage of the opportunities created by IT systems. This year, we are witnessing a real boom of new financial portals presenting annual reports on-line in an interactive or cross-disciplinary versions. The annual reports of such banks as BRE Bank S.A. and ING Bank Śląski S.A. are also worth mentioning, along with the reports presented by KGHM Polska Miedź S.A.

The Polish Insurance Association and the Polish Banks Association (ZBP) announced the third recommendation of good practice for the bancassurance market. The document concerns the so-called investment or savings insurance. It will enter into force on 1 January 2013. Simultaneously, the first recommendation of good practice was updated in respect of protective insurance linked to banking products. The purpose of both documents is to improve standards in the bancassurance market and comply with guidelines of the Polish Financial Supervision Authority.

Works on the draft “Third recommendation of good practice on the Polish bancassurance market in respect of insurance with an investment or savings component” were conducted for more than a dozen months by teams of experts appointed in the ZBP and the PIU. The draft document was also the subject of detailed consultations with the Polish Financial Supervision Authority, the Office of Competition and Consumer Protection, the Ministry of Finance and the Insurance Ombudsman. The central part of the recommendation is to define disclosure obligations of the bank against the customer by specifying the minimum scope of information that should be communicated to the consumer before providing the insurance coverage to the consumer. This applies in particular to documents relating to the conclusion of the insurance contract and terms of insurance which should include, among other things, the information on: costs incurred by the customer and the method of their calculation, principles of determining the amount of benefits due to the consumer and the possibility of the occurrence of the risk associated with a particular investment. The customer should also receive clear information whether the bank acts in the capacity of the insurer or an intermediary.

“The Third Recommendation requires that documents delivered to the customer be written in a transparent and clear manner that does not raise doubts in readers, and that all ambiguous expressions be interpreted in favour of the customer. Taking into account the experience of the financial sector with the implementation of MIFID, the document also includes some provisions concerning a verification of conditions for providing the insurance cover to the customer. Banks undertook, among other things, to check whether the customer meets the requirements for being covered by the protection, provided for in the conditions of insurance (in particular the age). In addition, if the customer exercises the right to opt out of insurance cover, banks have an obligation to inform the customer of all consequences of opting out, including any related costs. The principle that information materials on insurance should contain the information on the application by banks of the provisions of the Recommendation was also considered to be a desired market standard.” – explains Małgorzata Knut, chairwoman of the PIU Bancassurance Team. 

The First Recommendation of the PIU and ZBP on protective insurance linked to banking products was updated with the solutions used in the Third Recommendation. The changes introduced in that Recommendation constitute also a response to the demands of the PFSA and the current changes in the market. The new document was supplemented with, among other things, a new paragraph specifying the principles of bank’s conduct when the insurance constitutes collateral for a loan and the relationship between the bank and the customer if the bank considers it unjustified to further assert a claim from the insurer (an agreement on a transfer of claims with the beneficiary or a heir).

“The recommendations prepared jointly by the banking and insurance environment concern a substantial part of the insurance market. As shown by the results of the bancassurance market after the second quarter of 2012 collected by the PIU, the amount of gross premium written acquired in this channel is PLN 11.2 billion for life insurance and PLN 690 million for non-life insurance” – says Jan Grzegorz Prądzyński, president of the management board of the PIU.

This represents 57.5% of the premium on the life bancassurance market and 6.7% on the non-life bancassurance market. Investment products constitute as much as 88% of the premium acquired in the bancassurance channel by insurance companies. Non-life insurance is still dominated by products related to loans – financial insurance and real estate insurance.

I rekomendacja dobrych praktyk
III rekomendacja dobrych praktyk

See the report on bancassurance after the second quarter of 2012.

At the end of September 2012 TNS conducted a survey on bancassurance commissioned by the Polish Banks Association. The survey was conducted in two hundred bank branches around the country which represent all types of domestic banks. The survey shows that a vast majority of bankers (87%) sees a potential in combining banking and insurance services. What is important, a vast majority of respondents (66%) is of the opinion that the services of this type are added value for customers of their bank. The survey also shows that similarly to the previous year, a majority of customers chooses to additionally insure mortgage loans (77%) and consumer loans (73%) and nearly half (46%) obtains insurance for payment cards. In case of insurance of consumer loans and payment cards, the customer interest in those services increased over the last year – by 7 % for consumer loans and 4 % for payment cards.
“The data on the development of consumer loan and payment card insurance show an increase in customer interest in those services by several percent. This may mean that in such difficult times the Poles awareness concerning the possibilities of securing banking products used by them is raising” – says Krzysztof Pietraszkiewicz, president of the Polish Banks Association.
After the entry into force of the Third Recommendation, the Polish Banks Association intends to monitor its implementation and universal application and inform about the progress in its implementation by additional banks and insurance companies. The ZBP hopes that the Good Bancassurance Practice will become a universally applicable standard for insurance related with banking products and will ensure a high quality of services provided by banks.

Presentation on the recommendations for bancassurance.

The Polish Insurance Association became a partner of the 7th Health Market Forum – one of the most important cyclical debates on the health care system in Poland. The Forum takes place at the Sheraton hotel in Warsaw.

As part of the Forum, on 24 October Dorota M. Fal, advisor to the management board of the Polish Insurance Association responsible for health insurance, will participate in a discussion panel entitled “Financing of benefits and the future of health insurance in Poland”. The panel takes place between 12.00 PM and 2.00 PM.

As part of the panel invited experts will bring up a number of topics which may have an impact on the development of private health insurance in Poland:

• financial situation of hospitals in the context of the last contracting of services by the National Health Fund
• current and expected role of the public payer in the system of financing health care benefits
• additional health insurance – an overview and assessment of the objectives of the bill on additional health insurance; what insurance model are we aiming at?
• cross-border medical care – principles of using health care benefits abroad and reimbursement of medical expenses

During the Forum a PIU report entitled “The role of private health insurance in the health care system. How do they affect the access to benefits, innovation and medicines” will be distributed. A detailed programme of the Forum is available on the organiser’s website:

Participation is free for all participants after registration.

Thirty one associations of insurers (including the Polish Insurance Association), representing 87 percent of the worldwide insurance business, established on 9 October 2012 the Global Federation of Insurance Associations (GFIA).

“It’s a great day for the insurance industry around the world. The Federation will give our associations the ability to respond on a timely basis to international issues affecting our industry and to speak with one voice” – said Frank Swedlove, newly-elected GFIA Chairman and President of the Canadian Life and Health Insurance Association. “I am honored to have the opportunity to be the inaugural chair of the federation and will strive to ensure that our industry’s views are heard.”

Peter Braunmüller, Chairman of the Executive Committee of the International Association of Insurance Supervisors (IAIS), welcomed the new organization, stating: “As the global insurance standard setter, the IAIS values greatly the contributions of IAIS observers – who represent international institutions, professional associations and insurance and reinsurance companies – to the development and implementation of IAIS supervisory material. We look forward to working with the GFIA and its members as we all continue to promote effective and globally-consistent supervision of the insurance industry.”

Recaredo Arias, Secretary General of FIDES (Inter-American Federation of Insurance Companies) was elected Vice-Chairman of the new federation. The founding member associations also elected a Secretary of the federation, Michaela Koller, Director General of Insurance Europe. This means that Insurance Europe will undertake the significant work that will be required to support the initiatives of the new Federation in all key areas of concern to the global insurance industry.

The GFIA will be active in commenting on a broad range of issues affecting the international insurance industry, including developments in the systemic risk debate: the work of the IAIS in developing ComFrame, i.e. the common framework for the supervision of international groups; business ethics and trade issues as well as initiatives in relation to financial inclusion and anti-money laundering.

Governor Dirk Kempthorne, President and CEO of the American Council of Life Insurers, who chaired the GFIA’s inaugural meeting in Washington, stated: “THIS is indeed a historic day. Regulation of the insurance industry is increasingly being set internationally. The establishment of the GFIA will allow the industry to work more closely with international regulators in the development of sound and balanced regulation.”

Based on data from Swiss Re, direct gross premiums written by insurers worldwide amounted to USD 4.5 trillion in 2011. Members of the GIFA represent insurers who collected 87% of this amount. Associations of insurers from around the world have cooperated informally with each other for many years, most recently under the formula of the International Network of Insurance Associations (INIA). A formal worldwide federation of insurers with a global reach was formed for the first time. A website of the federation will be launched soon: www.GFIAinsurance.org.

Owing to enormous interest in the subject of the Conference and a large number of registered participants, the Polish Insurance Association decided to change the venue of the Conference to a hall at the Bristol Hotel, ul. Krakowskie Przedmieście 42/44, Warsaw.

Details of the event at:
http://rejestracja.piu.org.pl/?event=problematyka-abuzywnosci-w-ubezpieczeniach-na-zycie

Please, register for the Conference until 12 October 2012.

On 11 October 2012, the Allerhand Summit: Financial Regulations 2012 will be held in Poland. This year’s Summit is devoted to new regulatory frameworks for banking, insurance and capital markets.

The Summit will be held in Warsaw at the Polonia Palace Hotel, al. Jerozolimskie 42. The Polish Insurance Association has assumed the patronage of the event. One of the lecturers this year will be Andrzej Maciążek, Vice President of the PIU Management Board.

More information about the Summit may be found on the Web site of the organiser.

A pension paid out under the new pension system will be even lower than current benefits. Whereas the Poles — frightened by the crisis and discouraged from saving in the Third Pillar — in the first 6 months of 2012 made payments only to 12,000 Individual Pension Security Accounts (IKZE) from among 300,000 opened ones. The total of the payments equalled only PLN 5.5 million.

On the citizens’ initiative, the Parliament received a bill on IKZE amendment with the aim of making the system more attractive to all those who wish to receive higher pensions. The proposal reported by the ‘RAZEM’ Citizens’ Regulatory Initiative Committee is supported by the Polish Insurance Association. The costs and advantages of the solutions included in the bill were analysed by the Tax Studies Institute (Instytut Studiów Podatkowych) which prepared, at the request of PIU, a report assessing the efficiency and effectiveness of the solution proposed by the ‘RAZEM’ Committee.

In the new pension system, the average remuneration replacement rate will amount to about 30% for women and 40% for men (First and Second Pillars together). Whereas — as results from the report on the Third Pillar pensions in Poland prepared at the request of the Polish Insurance Association by the Tax Studies Institute — social expectations as to the replacement rate are minimum 75% of the last remuneration.

‘The only way to improve the situation that will occur after retirement under the new system is long-term independent saving. Unfortunately, as reflected by the data published lately, over 80% of people who should voluntarily save for the retirement are not doing that. All signs indicate that in the coming years, the interest of the citizens in Third Pillar investments will be low. This is closely related to deteriorating economic situation in Poland and the global economic crisis. Therefore, there is an urgent need for changes in the system of voluntary pension insurance, so as to make available forms of capital accumulation more attractive to the future pensioners’, emphasises J. Grzegorz Prądzyński, President of the PIU Management Board.

The first concrete proposal of changes in that scope was prepared by the ‘RAZEM’ Citizens’ Regulatory Initiative Committee and is awaiting consideration by the Parliament. ‘As soon as following several months of introducing IKZE to the market, it is clear that the expectations vested therein will not come true. The basic fault of the currently binding system is the fact that upon reaching the pension age, income tax will have to be paid at the moment of withdrawing cash. This means that the tax obligation will apply at the time when the funds collected will be most needed, i.e. after retirement’, explains Adam Sankowski, Proxy of the ‘RAZEM’ Committee.

One of the mechanisms proposed by the Committee is the introduction of tax incentives, thanks to which pension saving will become more attractive not only for the most affluent ones. The bill on IKZE amendment prepared by the Committee covers three basic demands:

• guarantee of tax exemption for life annuities. At the moment, progressive tax scale, i.e. 18% or 32% tax, applies to IKZE, and assuming that tax rates may rise in the future, this is a serious barrier in making a decision on long-term saving;
• application of PIT allowance basis in the form of an identical nominal amount of PLN 4,000 to be indexed every year. Today, the IKZE mechanism at most represents 4% of annual revenues, and no more than PLN 4,030. Only 3% of the most affluent Poles, earning over PLN 100,000 a year, may avail of the allowance in its full amount. The amount determination shall also extend the scope of people potentially interested in additional pension saving for uniformed services or persons who have just entered the labour market;
• allowance of 18% for everyone, both those who today pay tax at progressive and linear scale. Presently, IKZE does not apply at all to those paying linear tax, although they pay minimal National Insurance (ZUS) contributions and, therefore, should additionally save for their pension.

The analysis of foreign pension solutions prepared by the Mercer Advisors shows that similar tax incentives are present in many European countries. Exemption of the money paid out (in whole or in part), if the payment has the form of life annuity, is applied by the UK or the Netherlands. The tax allowance dependence on the form of payout upon reaching the retirement age has been introduced in Denmark and Spain. Whereas, the limit of contributions and/or limitation of payments defined as amount instead of percentage is applied in the UK, Ireland, Denmark and Spain.

The report prepared by the Tax Studies Institute headed by Professor Witold Modzelewski assesses the bill of the ‘RAZEM’ Committee as an accurate response to the need for a fair pension. It is a socially important solution whose beneficiaries shall be mainly people with average or lower income. The bill is worded clearly and simply and, at the same time, provides for a real incentive to save. And, what is most important, it is a solution acceptable for the government authorities.

Report by the Tax Studies Institute
Review of Foreign Systems by Mercer

According to data collected by PIU, in the first six months of 2012 property insurance companies paid out their customers over 7 billion PLN in compensation, while life insurance claims amounted to over 12 billion PLN.

Motor insurance market
In this sector during first half of 2012, insurance companies paid out 2.7 billion PLN in claims for automobile liability insurance and 1.74 billion PLN on the account of accident and theft insurance. The above data shows that in terms of automobile liability insurance general amount of claims increased by 2.55% in comparison to last year, while accident and theft insurance claims dropped by 10.5%.
Additionally, comparing the first six months of the current and last year:

• 2.1% more accident and theft insurance policies were bought;
• Average accident and theft insurance claim increased by 1.77%;
• The number of accident and theft insurance liability claims dropped by as much as 12%, from over 429,000 to 377,000;

“This means we’re observing a stagnation in a trend noticed already in the first quarter of 2012. Drivers report less smaller damages. This is most probably related to the fact that the Insurance Guarantee Fund has introduced an insurance discount verifying tool. In the opinion of Jan Grzegorz Prądzyński, President of the Board of the Polish Chamber of Insurance, smaller number of damage claims during the first six months of 2012 is due to good weather conditions in the first quarter and lack of car crashes caused by snow and big temperature fluctuations.
A more visible increase has been noticed in the field of automobile liability insurance damage claim – it increased by 7.5% in one year, from 4,800 PLN to 5,160 PLN. That is why generally the amount of damage claim increased though the number of damages dropped – from 546,000 to 521,000. In automobile liability insurances we can observe a positive technical result for the second consecutive time. However, it is already lower than in the first quarter of current year and amounts to 15.8 million PLN for the whole market.
“Technical result never increases linearly therefore it’s very hard to speculate today whether at the end of the year it will be positive or negative, especially that the pressure for higher compensations is ongoing and no-one can predict weather conditions for the last quarter of 2012” – says Jan Grzegorz Prądzyński.
First half of 2012 saw an increase in automobile liability insurance contributions by 8% in comparison to previous year, totalling in 4.4 billion PLN, with the number of insurance agreements rising by 2% (to 17.9 million PLN) in the same period. Accident and theft insurance premiums amounted to 2.9 billion PLN, which is 1.37% more than the year before, with the number of insurance policies purchased rising by 2.14% to 5 million PLN.

Property insurance market (without motor insurances)
Data for the first half of 2012 does not include latest meteorological disasters damage. Jan Grzegorz Prądzyński remarks: “Financial effects of these disasters will only be visible in financial statements for the third quarter and that is why we still have to wait a couple of months before finally evaluating the situation of the property insurance market.”
What might be interesting is the dramatic increase in the number of compensations paid out as aircraft insurance claims. However, it’s a one-time situation which is a result of a number of compensations for large-scale damages. Total amount of property insurance (excluding motor insurance agreements) compensations paid out in the first half of 2012 amounted to 2.66 billion PLN which is over 15,8% more than a year before. Property insurance premiums amounted to 6.3 billion PLN, which is 8.13% more than the year before.
It’s worth noticing that, in comparison to the same period of last year, there was no visible increase in the purchase of fire and natural disasters insurance (Group 8), just a small 1.79% rise.

Life insurance market
Life insurance claims remained on the similar level in comparison to last year: After the first half of 2012 they amounted to 12 billion PLN, which is 2.4% less than a year before. Just like in previous quarters, majority of compensations paid were related to Group I which can be linked to the period of short-term deposit contracts conclusion.
Group I also includes the most of life insurance premiums – almost 11.2 billion PLN, which is 21% more than a year before. A rise of interest in capital fund insurances have also been observed: the amount of premiums in this sector increased by 15% to 6 billion PLN, a the number of agreements by 8.8%, to 2.73 million PLN. Total amount of life insurance premiums came up to 19.6 billion PLN in the first half of 2012, which is over 17% more than last year.

Net financial result
Property insurance companies closed the first half of 2012 with 2.48 billion PLN profit, which is 6.5% less than last year. There was a small decrease in profitability in life insurance companies whose net profit came up to 1.7 billion PLN, i.e. 2.6% less than last year.

More information can be found in the TABLE

Fédération Française des Sociétés d’Assurances and Mission Risques Natureles invited representatives of the Polish Insurance Association to a working meeting on the functioning of catastrophic insurance system, which took place in Paris on 10 and 11 July this year.

During the meeting participants discussed issues related to legal and actuarial aspects of the system, catastrophic risk reinsurance and co-operation between the public sector and insurance sector in terms of danger management and results of natural disasters. The meeting was attended by officials from the French and Polish state authorities and insurance market representatives.

Below you will find materials from presentations given at the meeting.

Presentation – part 1
Presentation – part 2
Presentation – part 3

During the panel discussion organised by PIU and Ernst & Young advisory company at the Healthcare System Forum, part of the Economic forum in Krynica-Zdrój, the Ministry of Health confirmed commencement of work on the parliament’s bill on additional health insurance systems. Changes are also planned in the NFZ (the National Health Fund), which is the public payer system. The above will constitute first steps in the process of increasing the effectiveness of healthcare system financing methods. Competition of payers is one proposal that will be taken into account as a means of long-term perspective direction shift.

On September 5, a debate “Competition of Payers as a Way of Improving Healthcare System” was held at the Healthcare Forum as part of the Economic Forum in Krynica-Zdrój. Panel participants discussed the existing healthcare model in Poland, which is based on one public payer, mainly NFZ. Public calls for the change of the above have been an ongoing issue. One of the speakers in the discussion, Jan Krzysztof Bielecki, Chairman of the Economic Advisory Council to the Prime Minister of Poland, underlined that he sees no return to state budget financing of the healthcare system and that it’s essential to continue works aiming at establishing a rational attitude to healthcare system financing taking into account cost analysis and implementation of mechanisms which have already been successfully implemented in other sectors of the economy.

“One of the ways to improve the quality and increase the effectiveness of healthcare proposed by, among many, insurance industry is introduction of the competition of payers. The idea of competition, as opposed to one public payer system, assumes that each person will have the possibility of choosing whether their mandatory healthcare contribution will be paid to the public payer or to one of the private payers. Competing payers will have to attract patients, which will hopefully result in more effective management of financial means and improvement of the service offered. All this, of course, with respect of the rules of social solidarity and equal access to healthcare service” – said Dorota M. Fal, advisor of PIU management board, who led the discussion during the Forum in Krynica.

Experts agreed that competition of payers could be a step in the right direction therefore a discussion concerning this issue is necessary. Ministry of Health declared introduction of changes in the public payer system in the near future. At the same time representatives of the Ministry stated that passing a bill on additional health insurances quickly as well as improving the organisation of insurance market processes is vital as it will give insurance providers a chance to gain experience in financing healthcare in Poland. Jan Grzegorz Prądzyński, President of the Board of the Polish Chamber of Insurance, stressed that insurance providers already posses the knowledge, competences and experience of the international markets necessary for the cause and that they have proved effective in numerous healthcare systems as payers.

“We have already made the first step leading to greater, evolutionary changes of the system by commencing work on the bill on additional health insurances” – said Sławomir Neumann, Secretary of State at the Ministry of Health. However, Johan Hjerqvist, President of Health Consumer Powerhouse, a company analysing healthcare systems throughout Europe, pointed to the fact that works on the reform of financing solutions for Polish healthcare system have been in progress for over 20 years and it is the lack of brave decisions that still ranks Poland at the bottom of European healthcare system evaluation rankings.
Panel participants agreed that challenges awaiting Poland in connection with inevitable demographical changes force quicker implementation of healthcare system reforms. ”Today, the average cost of medical treatment of a patient over 65 years old is almost six times higher than the cost of treatment of people aged 26 to 30, with the number of the former to double in 2060. That is why the only way to achieve success in this field is to start introducing changes today. Otherwise, to cover the current scope of healthcare needs of the future society we will need 0.9% of GDP more as early as in 2020 with long-term prediction showing an increase to 2.6% of GDP in 2060” – concluded Dorota M. Fal
Summing up the panel, its participants expressed hope that the Ministry of Health would soon lead the healthcare sector into a better direction and that works of the government will reflect results of meetings held here in Krynica.

The second panel which took place on 6 September was devoted to different ways of financing healthcare. The system requires changes with choosing the effective financing model being one of the crucial elements of the reform. Participants of the panel entitled “Financing of healthcare – interministerial challenges” organised by PIU and Ernst&Young agreed that the current public payer system is unable to provide healthcare service within the scope and standard required by all patients. Jakub Szulc, MP and former Deputy Minister of Health, claimed that the system in its current shape will not “provide everyone with everything on 100% level.” For this reason, among others, Polish citizens currently spend over PLN 30 billion on healthcare services, medicine and parapharmaceuticals each year. The problem is that this money is spent in a dramatically ineffective way as only 300 million of this amount is dedicated to health insurance. Sławomir Neumann, Deputy Health Minister, once again announced implementation of the bill on additional health insurances. He admitted that without appropriate legal regulations insurance companies will remain overly cautious about entering this new market. Dorota M. Fal, health insurance advisor of PIU management board, said that private insurances are very flexible and therefore can improve the standard of healthcare service and facilitate access to it while remaining fully compatible in their shape and scope with the requirements of the public system.
At the same time experts underlined the fact that all proposed solutions will rule no-one out of the system as they are all based on the rule of social solidarity. Panel participants also talked about the role of other Ministries in the process of developing effective health protection system and the so-called alternative costs related to the healthcare system, i.e. the cost of sick leaves and disability pensions.