Diverging Trends in Different Categories of Private Insurance
With gross premium revenues rising 12.3 percent to a total sch 129.5 billion in 1993, the private insurance industry slightly raised its GDP share to 6.1 percent. For 1994, the insurers' association anticipates a deceleration of revenue growth to 3 percent, implying inflation-adjusted stagnation on a high level. Insurance payments expanded 8.4 percent to a total sch 66.9 billion in 1993 and are expected to rise unabated in 1994. However, the picture of the insurance industry given by premium revenues and expenditure in 1993 is distorted. Private health insurance is still hit by rising costs of health services and the by now strong reaction of households to premium increases. Growth of premium revenues by 7.8 percent (to sch 15 billion) in 1993 is entirely due to increases in premium rates as the number of risks declined slightly. For 1994 a rate of growth of 3.7 percent is expected, implying that, with expenditure rising by 7.8 percent (1993) and 3.4 percent (1994), the damage ratio will remain high. In damage and accident insurance, gross premia rose 6.4 percent to a level of sch 74.4 billion in 1993, while expenditure increased 6.3 percent to sch 49.5 billion. The damage ratio remained constant at an average 66.7 percent. Among the different insurance categories, developments in life insurance are noteworthy. Premium revenues rose 27.3 percent to over sch 40 billion in 1993, due to lump-sum payments. This form of investment is gradually becoming a substitute for conventional financial products, due to rising sales of insurance products by banks and to an attractive average yield. This would also explain the erratic movements of premia and payments over time which follow variations in interest rates and tax rules rather than reflect a long-term strategy to make provisions for old-age income. An analysis of trends in 1993 cannot neglect changes for the insurance sector caused by Austria's access to the European Economic Area (EEA) in 1994 and the EU in 1995. Operating in the "sheltered" sector of the Austrian economy, insurance companies were not exposed to foreign competition before. The bigger market and the freedom to offer cross-border financial services raised hopes for higher quality and lower prices of products. Apart from an already noticeable product differentiation in car liability insurance, offers of funded life insurances have been launched. A further indicator for the international competitiveness of the Austrian insurance industry is its productivity. According to an OECD study based on the ratio between gross insurance premia and the number of employees, the Austrian insurance companies, in an international comparison, exhibited a rather low productivity level in 1993. This suggests that adjustment to the opening of the Austrian insurance market has been insufficient and points to a considerable potential for cost and price cuts.
Divergierende Entwicklung in den einzelnen Sparten der Versicherungswirtschaft. Die österreichische Privatversicherungswirtschaft 1993/94; Diverging Trends in Different Categories of Private Insurance
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