The bonus-malus system has no defects and is applied everywhere in the world

For years, Bulgarian governments have been trying to introduce the so-called "bonus-malus" system - which means paying more for your Civil Liability insurance if you break the rules and create traffic accidents. Although it sounds like the right thing to do, this model continues to be unavailable in the country's insurance market.

The topic was put on the agenda at the end of last year when the Bulgarian government prepared a new bill. However, the political clouds have thickened over the country again, and given the looming new parliamentary elections, it remains a mystery whether the system will find a place among the parliament's list of things to do or will be postponed again for the future.

"Bonus-malus" has no defects, it’s applied everywhere in the world," Manlio Lostuzzi, Regional Officer of the Generali insurance group for Central and Eastern Europe, commented to journalists.

He explained that such a system exists even in Serbia, which, despite not being a member of the European Union, is ahead of Bulgaria in some parameters.

Its principle is very, very simple, very logical – if you generate a lot of claims, it's only right that you have to pay more," says Lostuzzi. "You know, it's also something that helps people pay more attention to how they drive."

Of course, sometimes the devil is in the details. When asked if any technical challenges could be foreseen in the process, Lostuzzi stressed that

when there is a new law, new rules, it is only natural that the details are important."

He elaborated that “obviously you're starting from scratch because at the moment you don't have any experience of how people will behave once you introduce this kind of system. Usually, if the company is free to set the rate, it will adjust it based on the experience it gains. But the principle is right."

Do Bulgarians get insured?

In Bulgaria, it is a well-known fact that the insurance sector is mainly driven by general insurance, or more specifically by vehicle insurance. Lostuzzi presented data according to which, whereas in Europe insurance penetration is 70-80% for life insurance and 20-30% for general insurance, it is the exact opposite in Bulgaria and Central and Eastern Europe.

He pointed out that in some of these countries, the gambling business is actually larger than the insurance business. According to him, the Bulgarian market is not particularly different from others in the CEE region.

The automotive segment represents the core [insurance] business. Overall, there is low insurance penetration. The region is not sufficiently insured."

According to Lostuzzi, climate change is also creating more and more events such as floods and other disasters.

"It's typical for people to start worrying immediately after something happens but after a few months, they forget everything. Home insurance is now considered one of the most important investments, and from what I've seen, people usually don't protect [their homes] properly," commented Lostuzzi.

In this regard, it has become increasingly clear to Generali that the role of the insurer is transforming.

It is clear that our role is to increase our activities, not only in terms of simply selling an insurance product, but also by advising clients and enabling them to understand what risks they are approaching," explained Lostuzzi.

He added that "there are situations where people prefer to make a bet instead of buying some kind of insurance, which is not very logical."

Still, "if you want to have real change in society, you have to have the support of the government."

The healthcare business

Another important business segment for Generali is health insurance. However, the high inflation of recent years has significantly affected the sector.

We have seen high inflation, especially in Bulgaria, in terms of medical costs - given that the healthcare business is important to us. We suffered a lot from this not only in Bulgaria but also in Serbia. High inflation in medical services," said Lostuzzi.

He also explained that this insurance segment, especially in Bulgaria, was mainly supported by the corporate sector because this is already considered

one of the most important employee benefits in a company."

In this regard, for Generali, the platform that it began using in several European markets, called AdvanceCare - is strategically important for this region.

"We believe that the healthcare business is something that will be a business line in this region; we expect to have growth and we started trying to make this platform international."

The platform started in Portugal and has already been adapted for Hungary and Serbia.

We’re not ruling out that the third country that will join this project is Bulgaria," said Lostuzzi.

The euro

According to Generali's regional director for CEE, Croatia's experience with changing the currency from kuna to euro last year did not show "big changes with our insurance sector" and specified that it was "obvious that with the euro everything will be more stable." He gave the example of Italy and admitted the rise of inflation there was due to the fault of unscrupulous merchants.

When we switched to the euro, we had a big jump in prices. Everyone used the situation to increase the bill in the restaurant through the currency conversion. This led to some inflationary effect, but it all depends on how the government will control the development of prices", added Lostuzzi.

Translated by Tzvetozar Vincent Iolov