MSV Life has become the leading provider of life insurance protection, long term savings and retirement planning in Malta. Its bancassurance partnership with Bank of Valletta, in combination with a strong network of around 80 Tied Insurance Intermediaries, has helped MSV to develop one of the strongest distribution networks in the Maltese market. Going forward, the company believes that investment in digital technology is essential when pushing for greater insurance coverage and is eyeing growth opportunities as Malta enters a new era in private pensions.
Having celebrated your 20th anniversary in 2014, could you give us an overview on the key developments that have influenced MSV Life’s operations over the last couple of years and your market position today?
Central to our success throughout the years was our strategic partnership with Bank of Valletta (BOV) which is our main distributor. From the onset this has led to a very quick, but substantial, growth in business. Originally, MSV was established by three partners, Middlesea Insurance, BOV and Munich RE. However, in September 2005, BOV acquired from Munich RE their 10% shareholding as well as a 1% holding in MSV from Middlesea Insurance. Today, MSV is jointly owned by BOV and Middlesea Insurance which has now changed its name to MAPFRE Middlesea after it became a subsidiary of the MAPFRE Group. Hence, we are also part of one of the largest multinational groups in Europe.
Our partnership with MAPFRE also had a very significant impact on how we operate. While we cannot really share product ideas because life insurance products need to be designed for the local market, we certainly benefit from the resources of such a large group. This helps us navigate Malta’s competitive insurance market. In fact, we currently have a market share of 65%, with close to 90,000 policyholders, annual revenue of about €156 million and a balance sheet value of about €1.6 billion.
How has Malta’s life insurance market developed compared to its European peers?
Life insurance coverage in Malta is currently only around 38% of the EU average. Most people who are initially obliged by the bank to take out life insurance, because they have borrowed money from the bank, do not retain that cover once the loan is repaid. We, as a company, have been trying to push for nationwide financial literacy campaigns, because I believe that these would help people understand better the need to protect themselves and to protect their families. These nationwide campaigns have been held in various countries successfully. But we cannot do this on our own, we need government support. Another reason for the low coverage is that Malta still does not have a voluntary pension system, and we have not yet created the pension assets that some other countries have. However, we do see that the sector is picking up on the back of low interest rates.
What are the key trends in the market?
People are saving more through insurance products. They are low risk investments. They do not provide a guarantee, but once a bonus is paid, it is locked in the policy and can never be taken away. The Maltese seem to prefer these low-risk investments. In 2014, the Maltese life insurance market grew by 24%, and in 2013 it grew by 15%. The bulk of this new business is coming from saving products. Moreover, in the specific case of MSV, our business increased by about 40% last year. But we are also noticing that regular savings are going down, whereas single premium savings are going up. People prefer to save lump sums of €10,000 rather than saving €100 or €200 a month.
In terms of growth and product development, what do you believe will be the major drivers in the coming years?
Malta’s pension reform will be a game changer and will lead to significant growth. Our company is very much involved in the pension business, and we intend to be the market leader once final amendments to the legislation are in place. We hope the tax credit on contributions of €300 will be increased in the future, otherwise the take-up might be quite limited. We are also advocating a system of workplace savings involving auto-enrolment to get around the problem of human lethargy when it comes to future savings. These systems have been used in other countries with tremendous success. For example in the UK it is estimated that auto-enrolment schemes have seen up to 9 million people start saving for their retirement, or increase the amount they are saving, in just three years. Compared to other European countries, Malta is behind when it comes to third-pillar pensions, but I believe we have the advantage of being able to learn from the mistakes of others and design regulations that will truly transform the sector.
How do you believe the insurance industry needs to adapt in the digital age?
We need to embrace innovation. For the time being, life insurance has not really gone digital because we need to assess the medical condition of our customers. But MSV Life is currently investing around €3 million in a new IT system, which will be launched later this year. Part of this plan involves an expert underwriting system, whereby technology would effectively be able to medically assess an individual based on a number of questions. From October, we should be in a position to have a system that automatically assesses 50% of the applications we receive for life insurance, without the need for our underwriters to intervene. Coupled with our digital efforts, we are also strengthening our presence in the communities and are opening a number of small offices. In 2014 we opened the first regional office in Birkirkara, and we recently opened a second one in Luqa. We want to be accessible for our customers through both traditional and new channels.
What are the key challenges that life insurers are facing at the moment?
The low interest environment is a big problem for life insurers because it affects the way we reserve, where we invest the funds and what products we design for our customers. We also still see geopolitical risks around us, which continue to create instability and have an effect on investment and capital markets. Costs are another issue. We are noticing shifts in consumer behaviour, and nowadays most people are conscious about product costs, while the insurers are facing increased compliance costs due to the introduction of Solvency II and enhanced consumer protection regulation.
What are your expectations for Malta’s economy in the coming years?
Economically, Malta is doing well. Malta has come a long way, and our reputation has gone up significantly due to the adoption of the Euro and Malta’s entry into the EU. We are now reaping the benefits of all that. However, if we want this growth to continue, we need to be stronger in carrying out outstanding reforms, with the pensions reform being an example.
Do you have a personal message for our readers?
MSV Life does not follow a pricing strategy, so we are not the cheapest in the market. We compete on service, rather than on price. While we increase the standard of service, we are continuously investing in technology. I also believe that people need to look at the financial strength and soundness of a provider and not only at price and return. After all, insurance is about selling long-term promises, and we seek to honour our commitments.
David G. Curmi is the Chief Executive Officer of MSV Life plc. He started his career in the insurance industry over 30 years ago during which time he held various senior executive positions with a number of insurance operators. David is an Associate of the Chartered Insurance Institute of the United Kingdom and a Chartered Insurer. He is a regular lecturer on various insurance topics at the University of Malta. He is also a director and/or board member of a number of public and private companies, and is Chairman of Trade Malta, a public-private partnership set up to help Malta-based companies to tap international markets. Previously, he served as President of the Malta Chamber of Commerce, Enterprise and Industry.
MSV Life p.l.c. (C-15722) is authorised by the Malta Financial Services Authority to carry on Long Term Business under the Insurance Business Act, 1998. Com No: 270715