“Those who redeemed policies had temporary cash needs and insurers now have a portfolio of stable clients. The tendency is toward stabilization, rather than decline. There are no more reasons for cancelations to rise in the coming period,” said Sorin Mititelu, general manager of BCR Asigurari de Viata.
The decline in the volume of early redeemed policies comes as the crisis period brought a peak of contract cancelation amid plummeting yields and rising need for cash.
The peak was reached in 2009, when the insurance market felt the economic crisis fallout most intensely. Thus, in the first quarter of 2009 alone life insurers’ clients cancelled policies worth RON117 million and by yearend redemptions had topped RON350 million.
Last year, in January-March, cancelations got close to the peak of RON116 million despite the economic recovery.
Amid the lack of cash on the market and clients’ shattered confidence, insurers coped with a booming volume of unit-linked policies during the crisis and the falling yields accelerated the pace of redemptions.
At present, a mixed insurance policy brings an annual yield of around 15%.
Insurers maintained as early as last year that the number of clients canceling such policies declined.
The life insurance market has performed way below expectations in recent years and while during the crisis underwritten premiums rose by around 3% per annum, the sales volume shrank significantly afterward. Thus, in the first quarter of 2014 life insurers’ revenue dropped by 9%, to 382 million lei (EUR87 million).
The steepest decline was registered by unit-linked insurance, which contracted by 17%, while sales of classic policies slid by 6%.
(English version by Catalina Apostoiu)