Industry Attractiveness
The Greek insurance industry is the 19th-largest in Europe in terms of gross written premium. A lack of awareness among Greek consumers towards the need for insurance is a leading reason why the industry remains relatively underdeveloped compared to the rest of Europe. In terms of life insurance premium per capita, Greece ranked 24th out of 32 European countries in 2012, and 23rd in terms of non-life premium. In terms of insurance penetration as a percentage of GDP, the Greek insurance industry has remained stagnant for the last 20 years. Insurance penetration as a percentage of GDP has just increased from 2% in 1993 to 2.4% in 2013. However, during the same period the European average increased from 5.7% to 7%.
The Greek economy is in recession, but is expected to improve in 2014. The economy is predicted to register a growth rate between 1.1% and 1.5% up to 2017, which is expected to support the insurance industry. The industry declined, in terms of gross written premium, from EUR4.9 billion (US$7.2 billion) in 2008 to EUR4.4 billion (US$5.7 billion) in 2012, a CAGR of -2.4%.
The decline in the life segment affected the insurance industry, as the segment accounted for 52.1% of the overall insurance industry in 2008, which reached 44.8% in 2012. The personal accident and non-life segments also registered declines in the same period. During 2009-2012, the personal accident and health insurance registered a decline of 14.4% (Year on Year) and non-life segment declined by 19.4%.However, the industry is expected to recover in 2014 by registering a year on year growth rate of 2.7% compared to 2013. The insurance industry is competitive with both domestic and foreign insurers offering a comprehensive range of products.
The number of operational insurers declined from 85 in 2008 to 69 in 2012. The number of life insurers decreased from 17 in 2008 to 13 in 2012, while the number of non-life insurers declined from 51 to 45, and composite insurers declined from 13 to 11 in the same period.
The industry is dominated by non-life insurers with a 51.8% share in 2012, followed by life insurers with 44.8% and personal accident and health with 3.4%. The financial crisis adversely affected the life segment and its industry share declined from 52.1% in 2008 to 44.8% in 2012. The life segment declined at a CAGR of -6.0% between 2008 and 2012 due to the effects of the financial crisis. Rising unemployment, which reached 24.2% in 2012 contributed to the industry’s decline.
However, the gradual recovery of the Greek economy, projected to start in 2014, is expected to create new employment opportunities and increase disposable consumer income. Furthermore the implementation of Solvency II will increase consumer confidence as life insurers will be forced to implement risk-management steps. Considering the effects of these factors, demand for life insurance is expected to increase over the coming years.
The Greek non-life segment increased at a CAGR of 1.0% between 2008 and 2012. It registered positive growth in 2009 at 29.2%, after which it declined. Motor and property insurance are the main categories in the non-life segment. The non-life insurance segment written premium increased from EUR2.2 billion (US$3.2 billion) in 2008 to EUR2.3 billion (US$3.0 billion) in 2012. The segment consolidated somewhat with the number of companies declining from 51 in 2008 to 45 in 2012.
In terms of distribution, agencies led the life and non-life segments, with respective shares of 54.1% and 52.1% in 2012.
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Segment Outlook
The Greek life segment is the second-largest in the country’s insurance industry, accounting for 44.8% of the gross written premium in 2012. Life insurance penetration decreased from 1.1% in 2008 to 1% in 2012. This penetration level is expected to increase to 1.1% by 2017. Overall, the life segment recorded a CAGR of -6% between 2008 and 2012, as Greece was severely impacted by the global economic and eurozone debt crises. The gross written premium registered by the life insurance segment is expected to increase from EUR2 billion (US$2.6 billion) in 2012 to EUR2.3 billion (US$2.9 billion) in 2017, at a CAGR of 3%. This increase is primarily a result of a gradual improvement in the economy. As of 2012, there were 13 insurers offering only life insurance products.
Individual life insurance constituted the largest category in the life segment, registering a gross written premium of EUR1.6 billion (US$2.1 billion) in 2012. In terms of gross written premium, the individual life category is expected to post a CAGR of 2.2% up to 2017. Unit-linked policies comprised the second-largest category within the segment, registering a gross written premium of EUR0.4 billion (US$0.5 billion) in 2012.
The category is expected to grow at a CAGR of 5% between 2012 and 2017. Pension insurance constituted the third-largest category in the life segment, accounting for a gross written premium of EUR0.2 billion (US$0.3 billion) in 2012. It is expected to increase at CAGR of 4.3% between 2012 and 2017. Group life represented the fourth-largest category in the segment, registering a gross written premium of EUR0.1 billion (US$0.1 billion) in 2012. In terms of gross written premium, it is expected to record a CAGR of 0.7% up to 2017.
The number of active policies in the life insurance segment totaled 1.1 million in 2012. This is expected to rise to 1.3 million by 2017. The combined ratio of the segment increased from 90.5% in 2008 to 114.6% in 2012, but it is predicted to fall to 105.6% by 2017. Many Greeks are currently experiencing economic difficulties, with unemployment at around 24% and a depressed demand for life insurance products. Another key challenge facing the life segment is the low level of public awareness regarding the need for insurance products.
With Greek public pension funds struggling, an increasing number of Greeks are choosing private pension plans, particularly as the public’s awareness of planning for retirement grows and the country has an average life expectancy of 80 years. A gradual increase will also be recorded in the demand for policies offering life cover, as consumers become increasingly aware of the need to provide for their families in their absence. However, the demand for private pension and pure life policies will increase as the Greek economy recovers. At this point, life insurance premiums are expected to be once again permitted to be deducted from taxable income, further incentivizing the purchase of life insurance policies.
Distribution Channels
The distribution network for life insurance products in Greece consists primarily of agencies, insurance brokers, other distribution channels and bancassurance.
Agencies are the main distribution channel for the life segment in Greece. This channel accounted for 54.1% of the total commission paid to distribution channels in 2012. The value of new business gross written premiums collected through the channel decreased from EUR960.8 million (US$1.4 billion) in 2008 to EUR761.7 million (US$979.2 million) in 2012. This value is projected to reach EUR836.5 million (US$1.1 billion) by 2017. Agencies accounted for 54.1% of new business gross written premium in 2012, which is expected to decline to 53% by 2017. The number of new policies sold by agencies declined from 933,503 in 2008 to 620,785 in 2012. This number is expected to increase to 674,199 in 2017. Agency branches in Greece are also staffed with financial advisors.
Brokers followed agencies in terms of new written premium generated in the life segment in 2012. The value of new business gross written premium collected through the channel decreased from EUR488.9 million (US$716.2 million) in 2008 to EUR410.2 million (US$527.3 million) in 2012, at a CAGR of -4.3%. The channel accounted for 29.1% of the new business gross written premium in 2012. This is expected to increase marginally to 29.3% by 2017, registering new business gross written premium of EUR462.6 million (US$590.4 million). The number of new policies sold by insurance brokers declined from 475,031 in 2008 to 334,304 in 2012. The number is expected to increase to 366,425 in 2017. As well as several local brokers, large brokers in the global market such as Aon and Marsh are also present in Greece.
The new business gross written premium registered by other distribution channels increased from EUR$210.5 million (US$308.4 million) to EUR185.2 million (US$238.1 million). Their market share increased from 12.2% in 2008 to 13.2% in 2012. The written premium through other distribution channels is expected to record a CAGR of 3.2% to reach EUR216.8 million (US$276.7 million) in 2017, with its share falling to 13.7%. The number of new policies sold by other distribution channels declined from 204,553 in 2008 to 150,924 in 2012. This number is expected to increase to 174,947 in 2017.
The new business gross written premium registered by bancassurance increased from EUR32.8 million (US$48 million) in 2008 to EUR32.9 million (US$42.3 million) in 2012, increasing its share from 1.9% to 2.3%. The new business gross written premium through bancassurance is expected to increase to EUR39.9 million (US$50.9 million) at a CAGR of 3.9%, resulting in a 2.5% share in 2017. The number of new policies sold by bancassurance declined from 31,837 in 2008 to 26,836 in 2012. This number is expected to increase to 31,790 in 2017.
Direct marketing channels in the Greek life segment comprise insurers’ branches, call centers, e-mail marketing and direct mail. The share of the direct marketing channels declined from 1.2% in 2008 to 0.8% in 2012. Written premium through direct marketing is expected to record a CAGR of 4.3%, increasing its share to 0.9% in 2017. The number of new policies sold by direct marketing fell from 20,114 in 2008 to 9,175 in 2012. This number is expected to increase to 11,280 in 2017.
The market share of e-commerce measured 0.4% in 2012. Written premium through e-commerce is expected to record a CAGR of 5%, the strongest growth among all distribution channels, resulting in a 0.5% share in 2017. The number of new policies sold by e-commerce fell from 6,216 in 2008 to 4,817 in 2012. The number is expected to increase to 6,019 in 2017.
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By GlobalData
Porter’s Five Forces Analysis
Bargaining power of suppliers: Low
There are several foreign insurers operating in the Greek life insurance segment such as Allianz, AXA and Interamerican. These insurers do not require the support of local banks, as they have large foreign capital bases to support their expansion. Thus the bargaining power of capital providers such as banks and other financial institutions is low in Greece.
Bargaining power of buyers: Medium
The bargaining power of purchasers of life insurance products ranges from medium to high. There is an increasing need felt by Greek citizens for private pension products. However, demand for other life products is currently limited by weak consumer purchasing power. With a gradual increase in incomes in Greece, driven by the economic recovery, there will be an increase in demand for life insurance products as awareness increases. This rise in demand will moderate buyer bargaining power.
Barriers to entry: Medium
Barriers to entry in the life segment are low, as evidenced by the number of foreign insurers operating in Greece. However, in terms of viability, the barriers to entry are high for insurers looking to enter the segment, due to the limited market size, low levels of awareness, and reduced consumer purchasing power.
Intensity of rivalry: High
The intensity of rivalry among life insurers is high as a result of the limited segment size. The life segment is catered to by 13 insurers offering only life products, and 11 offering a mix of life and non-life products. Low consumer purchasing power and low levels of awareness are restricting the segment’s size.
Threat of substitutions: Low
There are no substitutes for products offered by life insurers. The only substitutes for pension products are the public pension funds, which are currently facing difficult times.
