The storm is not over yet – Allianz Hungária prepared early

Alexander Protsenko, CEO of Allianz Hungária, highlighted the results of 2022 and the challenges of the years ahead in his annual interview to Biztosító Magazin. Events enough to fill a decade have happened within this one year, and various challenges have been assigned to the insurance industry. Towards the end of the Coronavirus pandemic, the company has already started preparing for the approaching storm. Certain trends do not appear immediately, but later, and many of them are still developing today. No one can foresee all the implications yet. But Allianz is a big and solid company, and its strategy will remain progressive and resilient.

We are living in turbulent times. What are the main factors influencing and what influence they have on the daily operation of Allianz Hungária? 

We are facing a very special and complex situation nowadays. Someone said that there are decades where nothing happens, and there are weeks when decades happen. We are having such times now, I think. This year started with Corona, by the end of February the war broke out in the neighbourhood with all the implications, the inflation started picking up, and by summer we found ourselves in the middle of a very heavy draught season, not to mention high interest rates and extra profit tax.

These economic developments have major impact on insurance industry and on Allianz. Unfortunately, it is not clear yet how it will continue in the future, because the full impact does not appear immediately, but is developing gradually. While the war came one day to the other, most of the other aforementioned factors are still evolving even today. The question is how quickly the market will adopt to this.

Remember the frog in the warm water? If you raise the temperature gradually, the frog won’t realize it until it’s too late.

With regards to inflation for example, it started growing rapidly since beginning of this year, the claims inflation is even higher than normal CPI.  We have a large Motor portfolio, therefore the inflation, especially the claims inflation affects us substantially. This also applies to real estate’s inflation, repair- and construction costs. Increasing interest rates substantially influence the overall business from the capital side and from the investment side. While higher interest rates are positive for insurance on long term, on short term they are quite challenging. The good thing is that Allianz is a large and solid company and luckily, we started preparing quite early, by the end of last year.

How does the extra profit tax affect Allianz Hungária?

The extra profit tax affected the entire industry – as well as Allianz Hungária – quite substantially. The total amount is more than half of the technical result of the entire industry. I think, however, that we can put this into another perspective, a more positive dimension by considering this extra tax as our contribution to the Hungarian community in challenging times just like the drought-related claims for which the industry paid about HUF 40 billion to Hungarian farmers in 2022.

Compared to the ‘Covid era’ how was the performance of Allianz Hungária this year? What result are you expecting for 2022-year end?

The overall picture is more diverse, not completely black and white. If you look at top line, growth and some other developments, we can see further improvements compared to Corona times. We managed to improve this year in several areas, from which I would highlight customer satisfaction, which is very important to us. However, the financial results will be negatively affected, it will be lower than last year. Still, we remain profitable and several business lines are developing positively.

How has Allianz Hungária progressed with the various developments that the company started in previous years? Did you manage to finish any of them?

I think we continue the direction we chose some years ago, there is no change in that so far. We can be proud of some concrete results and started some new and interesting things. For example, we implemented the “Voice of the Customer“ program to regularly collect detailed feedback from our customers and now we are leveraging this feedbacks to further improve our products, services and processes. To enhance customer experience, we launched further products, simplified the quotation processes and introduced new digital tools for  easier interaction with us.

Has Allianz Hungária started something new and interesting IT development to cope with the economic challenges?

On the IT side, the insurance industry is experiencing a huge cultural change. In previous decades, we first changed core systems and then introduced new tools for the client based on it. The problem was that by the time we changed the core system, and started dealing with the client-side, the back end was already outdated and customer experience was not uptodate. So, this time we started with the front end, the customer facing elements (portal, quotation, product etc.) and now will go on to the back end.

We are introducing a new core system called ABS, and Allianz group standard system. This is a major change, because it will transform the way how the entire company works.

This system will help us to further simplify the processes in the background. This transition happens in many small steps not to endanger the ongoing operation. So, customers, partners, employees don’t feel any disadvantages.

We also started to further develop our analytical skills. A new Advanced analytics team was set up to leverage the huge amount of data we are using across different parts of the organisation.

Have customer demands changed toward insurance products recently? Are people more likely to buy insurance policies then before? Or are people just postponing their investments due to insecure economic and political environment? How do you see?

It very much depends on timing. If we look back, we could see positive developments after Corona. In spring and early summer for instance, travel insurance picked up much faster and much stronger than expected, and in general the expectations were positive. However, right now, we can see the first signs that the customers are realising the economic environment being worse than they originally thought, which changes their behaviour. People started to be more cautious and more sensitive on pricing due to the rising costs. In addition, high interest rates are influencing decisions related to life insurance policies. So far through the year this has been stable, but now, in the light of current economic developments, people have less budget, which might have further implications, and might result in decreasing demand.

We need to convince customers that cancellation of life insurance is not a wise decision these days. Insurance is to provide safety and protection for clients in challenging times.

We see customers starting to react to this new environment rather recently, perhaps in September or October. For example, due to the forint’s volatility there is an increasing demand for denominated life products.

Sustainability and environment protection is an important topic not just for Allianz, but for you personally as well. Last year you explained some of the efforts that the company was planning to do. Where does Allianz stand today?

It is always easy to announce things, but the question is how to follow up on them, to avoid “greenwashing”. Luckily Allianz, as a global company is very much committed and doing many things on this. We are one of the founders and the driving forces behind the global Net-Zero Asset Owner Alliance. There are very clear goals on CO2 emission, so we also have measurable milestones as well. For example, sustainability measurements are included in our targets, for company and management. For example, an exact number of CO2 emission or ‘share of electricity from renewable sources’. Specific initiatives we are undertaking can be grouped in three levels based on their impact:

• The first level is the investment portfolio. Allianz, as a group has an investment portfolio of about 2 trillion euros. We apply environment related standards onto this portfolio – so that many companies we are invested in, follow a more environmental approach..
• The second level is the insurance business. There are segments for which we are not providing coverage anymore, for example for coal based energy generation. We also launched a new product for electric cars to promote the uptake of these vehicles in Hungary.
• With regards to the third, the operational level, there are several practical things that we are implementing right now, like the level of energy efficiency in our office building, more solar panels on the roof, less travel and so on.

So, I think the time is over for talking about exiting initiatives, practical things and measures need to be done now. The main goal is 2050. But if you wait until then, it is too late already, therefore we have specific interim goals, as well. We already working on achieving those targets, , so we follow up on our promises.

How does the current economic situation affect the efficiency of colleagues at Allianz?

The current situation affects us in many ways. We kept the benefits and the flexibility we developed over the Corona time. For example, people can work from home two or three days per week and should come to the office at least for two days.

There are different tools as well – not only individual IT devices, but entire infrastructure, trainings and interactions become much more hybrid and flexible, so we kept them. In general, our people and their habits have changed in the past two years, Corona changed us, changed the way we work as an organisation.

How do you see the forthcoming years, for example what type of risks will emerge and cause more “pain” than before? What new emerging trends do you see coming?

No one really knows how the current situations will develop. We see some trends starting right now, but they depend on how the current economic situation will develop. That is why right now I would avoid predicting the future.

Our strategy will remain more conservative and more careful to sail safely through this stormy environment. Meaning not only for us but for our employees and for our customers.

This is the time to focus on high quality, resilience and high sustainability. As the saying goes: “There is a flight to quality” – and this is what we are building on now, in the current extraordinary environment quality and stability is appreciated.

Cover photo: Biztosító Magazin / Ferenc Árpád Kocsis.