(MENAFN Press) Moldova's unemployment rate increased from 4% in 2008 to 7.4% in 2010 and with 36% of the country's urban population living below the national poverty line, Moldova is the poorest country in Europe.
Despite being the poorest country in Europe and registering negative growth in 2009 due to the global financial crisis, the Moldovan economy posted a strong growth of 19% in 2010 and is projected to exhibit double digit growth over the forecast period.
As the growth of the insurance industry is correlated with the country's economic growth, the Moldovan insurance industry recorded negative growth as a result of declining growth in the economy in 2009.
Similarly, the strong revival of the economy in subsequent years had a positive influence on the insurance industry, leading it to grow at a CAGR of 8.2% during the review period and is expected to grow at a CAGR of 10% over the forecast period.
Increased insurance benefits on damaged cars to increase demand for motor insurance
The Moldovan parliament passed a law in April 2012 to increase the amount of insurance benefits paid on insured cars in case of damage.
The decision is expected to act in favor of customers and will, in turn, drive demand for motor insurance products. Prior to this legislation, insurers were using aging coefficients in calculating the compensation for car damage.
According to the amendment in legislation, aging coefficients of vehicles will no longer be considered in settlement of claims.
he benefits paid to insured persons will be in line with the extent of damage and the benefits will be paid in full for cars between three and four years old. Moreover, the price of insurance will remain same.
Savings and credit institutions to sell insurance policies
The amendment made by the Moldovan parliament in April 2012 opens new distribution channels in the insurance industry.
The recent amendment enables credit and savings institutions to sell insurance policies. Until recently, only insurance companies were allowed to sell insurance policies. The opening of these new distribution channels is expected to encourage the growth of the insurance industry.
Brokers gain more share in insurance industry
The brokers' distribution channel is increasingly gaining prominence in the Moldovan insurance industry. The share of brokers, in terms of gross written premiums generated, increased from 23% in 2010 to 30% in 2011.
The distribution channel generated 93% of its revenues from the non-life insurance segment (including personal accident and health insurance) and the rest from the life insurance segment.
High loss ratio in the non-life insurance segment remains a key concern
The Moldovan industry recorded high fluctuations in loss ratio during the review period across the three insurance segments. Moreover, the loss ratio was fairly high in the non-life segment throughout the review period.
Non-life insurance is the major segment in the Moldovan insurance industry and a loss ratio as high as 85% during the review period is expected to push the combined ratio over 100%.
A combined ratio of more than 100% reflects underwriting losses which is a concern for the industry as a whole. The loss ratio of the non-life segment stood at 68.4% in 2011.
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