The Culture of Risk Is Not Italian
IF LIFE INSURANCE IS GROWING, PROPERTY INSURANCE IS STAGNATING. BUT THE REAL CHALLENGE IS IMPLEMENTING DIGITAL INNOVATION TO CREATE CUSTOMIZED PRODUCTS AND SELL THEMby Andrea Celauro
Translated by Alex Foti
Italy is OK, but not excellent. This is the basic judgment emerging when assessing the Italian insurance industry in comparison to other countries. Life insurance and property insurance are marching at two different speeds. The former moves more quickly, also thanks to greater financial engineering which is the effect of the entry of banks in the marketplace, and the latter somewhat slower, a reflection of the fact that in Italy the culture of insurance is still limited compared to other countries, auto insurance excepted. Thus spoke Fabio Carniol, CEO of Helvetia Vita and Chiara Assicurazioni, and Bocconi alumnus (Bachelor of Business Administration in 1990) recently put in charge of relationships with managerial alumni by the Bocconi Alumni Association (BAA).
➜ What is the snapshot of Italy's insurance industry?
Life insurance has experienced a strong development over the last few years, compared to other countries, mainly thanks to banks and post offices. Until a couple of years ago, top-selling products were inflation-adjusted policies with good returns and a guaranteed minimum, but the low level of interest rates and the high volume of capital absorbed by these products is favoring the spread of unit-linked insurance, where one or more investment funds are linked to an insurance contract. The problem is that, in Italy, investment in pension funds is still very low compared to other advanced economies.
➜ Are we still a country unwilling to buy insurance?
In some ways, yes. For example, we are still trailing behing in life insurance, which are widespread only in the case of mortgages. In Italy, the life insurance business is almost entirely composed if investment products, so that it strongly resembles the market for private wealth management. Another example: only 1/4 of the Italians buy insurance on the home they own, and, although it is growing, the health insurance market is still underdeveloped by international standards. All this drives people to misallocate their savings, keeping them liquid on current accounts or short-term investments because “you never know", instead of using that money to build a complementary pension plan or put kids through college. In the market for insurance against property damage, Poste Italiane and the country's banks are growing strongly, gaining market share at the expense of insurance agents.
➜ But does this concern only private individuals or also firms?
Large firms are well insured, small ones are not. Also in this case, risk management is still a bit behind, and this is a weakness for Italian businesses, which are often left unprotected against major mishaps.
➜ How has macroeconomic stagnation impacted the industry?
The crisis has had the strongest impact on damage insurance. In auto insurance, average premium is declining, due to the strong competition and the lower incidence of claims, due to lower car use and a contraction of the car fleet. The cost of insurance scams remains high in comparison to other countries. And there has been no growth in the other branches of property insurance, despite the fact that Italians are under-insured.
➜ What lies in store for the future?
Digital innovation, which is both a great opportunity and a great threat. Black boxes, smart home sensors, wearable healthcare gadgets will all allow companies to better profile their clients, in order to build customized products, and apply discounts to those whose behavior prevents hazards. Technology will also simplify purchase of insurance products and improve after-sales service, such as the handling of claims. Governing this change is the biggest challenge the insurance industry is facing right now.
