Five Group initiatives: continuous efficiency and profitability improvements in the core business
Five strategic initiatives in our core underwriting business build on the foundation of our strong capital base.
A programme was developed aimed at safeguarding and/or increasing sustainable operating profitability in each of the three business lines of property and casualty insurance, health insurance and life insurance, and this programme is now being implemented under the supervision of the relevant expert Board Member. Two further strategic initiatives are running alongside this with a Group-wide effect on the core business.
1. Property and casualty insurance: Further increases in earnings power
A significant increase in earnings performance is one clear objective in the property and casualty insurance segment, which is the segment from which UNIQA expects the largest amount of premium growth, especially in CEE. The combined ratio is the index used to measure this, i.e. the ratio of expenditures for insurance operations and benefits to premiums written. Supported by investments in operational excellence, we have initiated a number of projects here aimed at reducing the combined ratio to below 95 per cent on a sustainable basis by 2020. Among other things, the focus will be on optimising premium calculation, portfolio management and claims management as well as on enhancing the efforts to fight fraud.
Property and casualty insurance
In line with our strategy we were able to improve the combined ratio even further in property and casualty insurance, to 96.8 per cent in 2018. We had to post more major damage in the industrial segment, even though the storm damage was below average in the reporting year. The balance of the damage was thereby within the scope of our forecasts in 2018.
Essential drivers for the actuarial improvements achieved were significant increases in average premiums in car insurance, as well as strong growth in the homeowners and commercial sectors, both in the CEE markets and in Austria. Our multi-year programmes in portfolio management and in underwriting also made an impact. We respond to our target segments far more effectively today based on modern data analyses and active new business monitoring, and are also able to control our growth much more closely. In claims management, on the other hand, we increasingly laid our focus on achieving higher customer satisfaction.
The new initiatives we prepared included cyber risk cover for industrial customers, with a package combining insurance and integrated service, as well as the launch of D&O insurance. We also formed a joint venture for innovative mobility services with a view towards future changes in mobility behaviour. Lastly, in CEE, we launched pilots for new telematics-backed, flexible motor vehicle insurance, building on our many years of experience with telematics solutions in Austria.
2. Health insurance: Confirmation of our leading position
UNIQA is the clear market leader in Austrian health insurance. This area is a crucial centre of excellence and therefore a main pillar that supports our company’s earnings. This is why defending our leadership position in this profitable area is one of our most important objectives.
Rapid technological advances are currently the biggest driving force in healthcare. In the world of individualised medicine and adaptive insurance, the classic roles of the healthcare industry are being reshaped. UNIQA wants to play a leading role in this transformation. Further expansion in services to customers is a key priority here. We are planning selective investments for this throughout the value chain in the areas of health advice and provision, health services and digital health solutions.
The Akut-Versorgt (acute care product) presented in 2017 and rolled out last year continues to be very well received. In collaboration with Döbling Private Hospital, which is also part of the UNIQA Group, this package grants our customers in the Vienna area rapid access to medical care on weekends or at night, for example, in cases of cuts, circulatory problems or sports injuries. Offered as a cost-effective insurance module, this service has now also been successfully rolled out to the Greater Salzburg area. Implementation is planned in the Graz, Klagenfurt and Lustenau regions in the first quarter of 2019.
In addition, we set up the new online health platform “medUNIQA.at” as an important service in 2018. UNIQA customers are able to find out comprehensive information here on health issues and on existing and new VitalServices. A significant step was also the successful launch of a network of private medical practitioners, and of other healthcare providers such as pharmacists, laboratories and radiology institutes. As part of the initial phase we were able to ensure rapid access to expert medical care as well as direct billing for the services provided for the international students insured with one of our comprehensive policies. The LARA project (the name comes from the German acronym for Labs, Doctors, X-rays and Pharmacies) aims to push forward with further expansion of the network in 2019, including plans to also make it available to all our health insurance customers.
3. Life insurance: Repositioning of the product portfolio
The low interest rates that have persisted for many years have a particularly strong effect on life insurance. Earning capital costs over the long term is difficult under the current conditions in the capital markets, depending on the relevant investment strategy. The capital-generating life insurance, that traditionally dominates the market in Austria, is particularly affected by this. The strategic initiative in this line of insurance is therefore targeted predominantly at ensuring a new direction for the product portfolio and increasing the profitability of existing contracts. One crucial element here involves designing life insurance products that generate the required margins both for customers and for UNIQA despite the low interest rates and that have capital requirements in line with profitability.
We presented our new unit-linked life insurance in June 2018, and at the same time released it as the first product for bank sales on the UNIQA Insurance Platform (UIP), our new IT core system. This completes the realignment of our product landscape in endowment life insurance. The new products meet all regulatory requirements, provide important benefits as compared with the competition and can also continue to exist sustainably in today’s difficult capital market environment. At the same time, preparations are underway for the roll-out of additional products on the UIP and for the transfer of current insurance portfolios onto the new platform in 2019.
4. UNIQA Insurance Platform (UIP)
The objective of the programme is nothing short of the renewal of the core system in all sectors and the associated organisational transformation of the Group. In the medium term, UIP will replace the existing IT core systems that no longer map innovative processes, products and functionalities effectively. This project is designed to last for more than ten years and will put UNIQA’s business on a completely new foundation: the UIP will dramatically reduce product development time (time to market), create flexibility in the product design and, in the medium term, significantly reduce the operating costs of overall data processing. Additionally, we will create the necessary conditions to better satisfy the expectations and wishes of our customers in future, which are changing ever faster and radically in an increasingly digital world.
UNIQA Insurance Platform (UIP)
The first important programme milestone of introducing unit-linked life insurance for Austrian bank sales was completed with the successful go-live on 13 June 2018. Phase 1 of the UIP was therefore completed on time, on budget and within scope.
In parallel with this, we also worked intensively on phase 2, i.e. activating unit-linked life insurance for sales, in order to ensure the go-live scheduled for June 2019. Preparations for phase 3 involving the implementation of classic life insurance on the new platform started in the second half of 2018 as well.
In addition to this focus on life insurance, preparatory work also began in early 2018 for property and casualty insurance, meaning that we will be able to begin implementation of products from this business line starting in 2019.
5. TOM – Target Operating Model UNIQA Austria
Since the beginning of the UNIQA 2.0 strategy programme in 2011, the Group has been working on making all of its customer processes more efficient, faster and less expensive. This modernisation and optimisation project, referred to as the “Target Operating Model”, mostly involves internal processes that are not visible from the outside. On the one hand, it focuses on bringing together settlement units in locations where high-quality services can be provided at low cost and, on the other hand, on standardising the many individual products and processes. The savings potential that will be unleashed as a result of implementing the new Target Operating Model will increase gradually and reach a double-digit million euro figure before 2020. In part, these savings will also be based on capacity changes that will take place as much as possible over the course of natural fluctuations and in agreement with our employees.
TOM – Target Operating Model UNIQA Austria
A major priority for TOM in 2018 was the laying out of detailed plans for cooperation between the Group Service Centre in Nitra, Slovakia, and the control and processing entities in Austria. This included the implementation of processes for control measures and continuous improvements, along with specification of the key figures across the different sites. Essential processes from the central Austrian service entities and regional offices were also outsourced to the Group Service Centre by September, as scheduled. This important step was followed by a phase of stabilisation and quality assurance.
We also introduced optical character recognition (OCR) for out-patient health insurance in 2018. A large proportion of the manual recording activities can now be saved through the potential for optical recognition of virtually all types of documents. We plan to increase the level of automation and therefore the effects of savings even further in 2019.
A further innovation in 2018 included the implementation of an energy monitoring and management system for 96 UNIQA sites throughout Austria. We have already been able to develop numerous measures in the first year aimed at improving energy efficiency and at reducing energy costs based on the information gathered through the system. In addition to isolated upgrades to the technical infrastructure, these also included various changes in our consumption behaviour.
Lastly, we carried on with our efforts to clean up our product portfolio in preparation for the UNIQA Insurance Platform (UIP). One-third of the legacy contracts defined in phases 1 and 2 were processed by the end of 2018 as a result. This clean-up will also represent an important focal point for 2019.