THE INSURANCE MARKET INCREASED BY 25 PER CENT
Plamen Yalumov, member if the Executive Board of Allianz Bulgaria, to the BANKER weeklyMr. Yalumov, do you have information about the results of the entire insurance market for 2001?- No official data has been published yet, but according to preliminary information the total premium revenues of the entire market are around BGN55-60MN, or some 20-25% up from 2000.Which insurance activities account for this result?- It is mainly due to the rent insurances, which most of the companies offer. Allianz Bulgaria Life, however, focuses on the long-term mixed, or as they are also called saving insurances, as well as on the long-term rent insurances. Therefore, we have registered an increase in these products.The amendments to the taxation legislation also stirred up the insurance market. There were no tax relieves at all till the year 2000. In 2001 law-makers tried to grant tax preferences which were not clearly formulated, and ultimately the Chief Tax Administration interpreted them restrictively - they concerned pension and health care insurances only. As a result of much debate the new Taxation Act (which is much better than the former law) was passed in the end of 2001. I expect a much better development of life insurance in 2002, because a wider range of life insurance products are granted tax concessions. These are saving life insurances, pension, health care and risk life insurance products. There are some flaws in the law, which we'll try to eliminate this year when drafting the new act jointly with the Finance Ministry.In addition to being a member of the Executive Board of Allianz Bulgaria, you are also a commercial attorney of Allianz Bulgaria Life. What are the company's results for 2001?The year was quite successful for Allianz Bulgaria Life. The company's premium revenues totaled BGN6.35MN, up 119% from 2000, and the profit amounted to BGN729,000. The company registered a 105% growth from 2000 in mixed life insurances alone. And as life insurance is a long-term business, the first year performance is very important for us. If a client buys a life insurance policy, he remains our client for 10-20 years.Which were the major tendencies on the insurance market last year?- Many of our clients chose insurances in US dollars and euros. The relative share of life insurances in Bulgarian currency decreased. This is a consequence of the big crisis in 1996-1997 when almost 100% of the Bulgarians had life insurances in Bulgarian leva, which devaluated. As I've already said, life insurances are long-term products and the choice of currency for them is very important. The chosen currency should be stable. Thus, the client could be sure to have saved money after 20 years. Therefore, we worked out a number of products in US dollar and euros.The draft bill on amendments to the Insurance Act is to be soon completed. What changes do companies insist on?- One of the important things is to permit the banks to sell life insurance products, as is the normal practice worldwide. As financial institutions banks could offer complex services to clients. Most of the banks have a well-developed network in the country and are also much intrested in such an amendment.Some of your colleagues insist on a reduction of corporate income taxes. - This is another important issue, regarding the Corporate Income Taxation Act. Amendments are indeed necessary there, because under the effective law insurance companies are paying much higher taxes than all other economic entities. The analysis of our life insurance company for 2001 showed that the tax we pay is 41% of the profit, which is too much. If a tax is levied on the company's profit, it will be paying about twice less.It is said that one of the possible amendments to the law is to give an opportunity to the Agency for Insurance Supervision to exert control on where the companies invest their free financial resources. How would you comment this?- This is principally reasonable, because we are managing the money of our clients, especially in life insurance companies. Therefore, there should be some external control on the finances. This is the normal practice worldwide. But the insurance companies have their own finances as well and it is not logical to control this money, except the equity capital which should be always available.Have Bulgarians get accustomed to buying insurances?- Yes. This became a fact over the last couple of years. Some people show interest towards the offered products, coverage, etc. This is normal, because currently only about 1% of the employed population has long-term insurances, while the normal percentage should be around 40-50 per cent, according to me. This means that there is a huge niche on the insurance market (I mean long-term insurance products). A very small number of people have such insurances at present.Which are the most demanded products now?- Saving insurances are definitely the best-sold products. The reason is that a significant part of the premium goes to investments. In about 20 years, which is the usual term of such an insurance, the money invested in it could double.