Premija osiguranja

Insurance: Investment in Prevention

Insurance as a measure of market maturity

Investments in a corporate environment rarely start without a suitable insurance policy being contracted for the project that is the subject of the investment. On the other hand, what is the situation concerning the perspective of farmers and the potential protection and prevention of risks for their work and investments?

Distrust in financial institutions, products and services, including insurance companies and insurance, is a relatively common phenomenon in Serbia, as well as in other countries. Investing in insurance is a momentary process; the effect is evident only if damage occurs, which makes clients feel their investment is “futile”. In fact, the truth is the other way around – although the product is not consumable, by contracting insurance, prevention becomes the best medicine.

The report published by the National Bank of Serbia indicates that, after the growth of the world real GDP of 6.3% in 2021, its real growth is estimated at 3.4% in 2022 and a slower growth of 2.8% is expected in 2023, under the conditions of cumulative negative effects in the past three years (coronavirus pandemic, geopolitical tensions, inflation and interest rate movements). Under the conditions of multiple increased risks, the global insurance market in 2022 recorded a slight decline of real GDP of 0.2%, with a gradual recovery expected in the next two years, but below the trend of real GDP growth. The real growth of the global non-life insurance premium in 2022 was also estimated to be 0.9%, with an estimated growth of 0.6% in developed countries and 2.7% in developing countries. In the same year, the life insurance premium recorded an estimated real drop of 1.9% at the global level – in developed countries it was -2.8%, while in developing countries the estimated growth was 0.9%. The level of development of the insurance sector in the Republic of Serbia is significantly below the average of the European Union member states. This is supported by indicators of the development of the insurance market – the ratio of total premium to GDP and total premium per inhabitant, with the potential for improving this position.

Even after nearly ten years since the great floods that hit our country in 2014, especially in the Obrenovac area, the situation with awareness and “literacy” in the area of insurance and its importance has not changed significantly. This is supported by severe damages that affected the agricultural sector, residential and commercial buildings and infrastructure after the storm that hit the region and Serbia in June this year. The supercell storm, a new phenomenon in these areas, left catastrophic consequences – many fields and crops were destroyed by flooding, orchards were devastated, and houses and gardens were damaged by hail, wind and fallen trees. Even vehicles that suffered significant damage were not immune to the impact of the supercell storm, while solar panels were rendered unusable.

Should this worry us, given the increasingly pronounced effects of global climate change affecting all spheres of life?

All this raises additional concern because, although they are part of a greater global meteorological scheme, these types of disasters are becoming more frequent in our area, while awareness of the need for prevention and reduction of potential damage is not growing at a rate adequate to the increase in risk. Data on damages that occurred after the supercell storm and insurance coverage for such damages are not yet available, as the storm has recently passed, and insurance companies are still processing damage claims. The percentage share of crop insurance in Serbia, according to the official statistical data of the National Bank of Serbia for Q1 of 2023, is 4% of the total insurance premiums paid, although agriculture is one of the most important sectors of the Serbian economy, contributing to the total GDP with approximately 7%.

To strengthen clients’ trust in insurance, with the tendency to achieve maximum benefits for policyholders, it is important to understand and point out the increasing advantages the mere contracting of insurance policies has, especially today when potential risks are on the rise, with the impact of climate change being only one of the elements of such risks. The EuroSolutions team of experts is at your service if you need more information and support.