The Nordic insurance markets

Competitor behaviour
The Nordic insurance markets are characterised by the customer’s direct contact to the insurance company and large market players, and by large insurers focusing on profitability. Insurers compete on price as well as on content and service.

The situation is expected to change in 2009 and 2010 as price competition becomes less important due to an increased requirement for capital among companies whose capital was reduced in 2008 as a result of losses on securities, unprofitable insurance operations and the upcoming tighter solvency rules with larger capital requirements. There is a good probability that the market will see reduced price competition from small and medium-sized companies which have extensively used low prices as a marketing tool in recent years.
 
Denmark
Competition in Denmark from 2005 to 2008 was dominated by aggressive price-driven behaviour by a number of small and medium-sized companies. Claims expenses were low in those years, permitting market players to use increased earnings for competitive purposes. Rising claims expenses and losses on securities caused price competition to subside during 2008. Several companies announced premium increases during 2008 as earnings came under pressure. For many Danish insurers, rising claims expenses and declining premiums triggered an adverse combined ratio performance in 2008.

The aggressive market behaviour of small and medium-sized insurers from 2005 to 2008 is expected to be replaced by endeavours to strike a good balance between price and risk in the years ahead. The price changes already announced will gradually feed through as gross premiums earned in 2009 and 2010.

No new players entered the Danish private market in 2008. As regards the commercial and corporate market, a foreign group opened an office while another announced an intention to offer insurance to large businesses.

Norway 
Competition in the private and commercial markets in Norway in 2008 was dominated by rising claims expenses and a need to increase prices in order to sustain profitability. The years 2003-2006 saw unusually low claims expenses, triggering a fall in the prices of a number of main products. However, the underlying claims inflation continued to rise, and since mid-2007 average prices have gone up. Price competition in the form of bundling discounts is used extensively in the Norwegian mass market because it enhances loyalty, while the use of introductory discounts offering lower prices to new customers than to existing customers has declined. TrygVesta operates a principle of price transparency for all customers and accordingly does not use introductory discounts.

Small Norwegian insurers have increased their market share in recent years at the expense of larger companies. The small players can be divided into two groups:
1) companies offering a full product portfolio to the private market; and
2) niche companies focusing on specific insurances to a segment or specific geographical areas.

Some of the small companies are expected to retain their growth ambitions despite difficult conditions for investment portfolios, although all market players are assumed to focus on profitable growth and capital.

New insurers in the market originate from the banking sector, but the challenges facing financial institutions in 2008 are assumed to impact those competitor’s capital requirements, hence reducing their incentive to expand unprofitably into new areas in the short and medium term. 

Finland
Competition in Finland in 2008 was marked by rising claims expenses and a consequent need among the large insurers to increase prices. Bancassurance is common in Finland, and TrygVesta/Nordea has two competitors where the insurance company is part of a banking group. 2009 is expected to see rising prices in order to offset the impact of higher claims expenses on profitability, and TrygVesta has scheduled price increases for 2009. By international standards, customers in the Finnish market are among the most loyal insurance customers with average relations to their insurer of more than ten years.

TrygVesta has been an active player in the Finnish market since 2001, and has built a portfolio of DKK 432m (EUR 58m).

Sweden
The Swedish market is generally characterised by being served by call centres. TrygVesta is growing rapidly in the Swedish market, partly thanks to the bancassurance partnership with Nordea and partly to active additional sales to new customers through the company’s own call centre. The partnership with Nordea has contributed to a quick penetration in Sweden where bancassurance is a fairly new concept.

In line with trends in the other Nordic markets, the underlying claims performance requires price increases in order for profitability to be maintained, and TrygVesta has scheduled price increases in 2009.

TrygVesta has been an active player in the Swedish market since 2006, and has built a portfolio of DKK 259m (SEK 380m).

Corporate
TrygVesta’s corporate business has grown since 2006. The corporate market is characterised by medium-sized and large businesses served directly by the insurer or through an insurance broker. Large customers in particular see international insurance groups as an alternative to the Nordic insurance companies. In a historical perspective, however, international groups have only to a small extent been able to win market shares.

Like in 2008, players are expected to see a good deal of change in 2009. TrygVesta began offering corporate insurance to the Swedish market in 2008. A business partnership with AXA Corporate Solutions meets Nordic customers’ insurance requirements outside the Nordic region and AXA customers’ insurance needs in the Nordic region. Furthermore, Allianz has announced a partnership with Topdanmark for selling workers’ compensation insu-rance in Denmark, and Zürich Versicherung intends to offer direct and broker-based insurance to large corporate customers throughout the Nordic region. Finally, the financial turmoil seen in 2008 should be expected to induce some of the international groups experiencing challenges in respect of their capital strength to reconsider the value of having a presence in the Nordic market. 

TrygVesta in 2009 
Being the second-largest insurance group in the Nordic region, TrygVesta has in-depth knowledge of and closely follows up on developments in the market. As described earlier, an economic downturn and declining investment portfolio values are likely to cause a number of players in the Nordic markets to change their behaviour in various respects. As things stand early in 2009 it is still too early to draw conclusions about the consequences the developments might have on market shares, but TrygVesta intends to seize any opportunities that contribute to profitable growth.

TrygVesta’s share of the overall Nordic market is expected to rise in the years ahead simply as a result of the rapidly growing market shares in Finland and Sweden. In addition to the Nordea partnership, TrygVesta is establishing own sales channels and other partnerships, for example with affinity groups, thereby gaining a broader foothold in the Finnish and Swedish insurance markets.

In the Danish and Norwegian markets, TrygVesta aims to retain and develop our market position through our behaviour, by striking a good balance between price and risk, and by offering dynamic, compassionate and innovative service to our customers, in claims situations as well as the ongoing follow-up.