Academia de Studii Economice Bucuresti Faculty of Business Administration

Life insurance policies in Romania

Coordinator: Laura-Elly Novac

Team: Burciu Andrei Badea Otilia Dojana Raluca

Table of contents

I.

Life-insurance market in Romania

II.

Who is it addressed to?

III.

What does it insure?

IV.

What risks are covered?

V.

What are the indemnification clauses?

VI.

Exclusions

VII.

References

Life Insurance Policies in Romania -Comparative analysis-

Abstract: The authors perform a comparative analysis of life insurance offers belonging to two major insurance companies in Romania: Grawe Insurance Group and Groupama Insurance. An overview of the elements and structure of a life insurance policy and a glance at the Romanian insurance market will be analyzed in the following paper.

1. Life-Insurance Market in Romania

Life insurance is to ensure the payment of money by the insurer, in case of an event related to the insured individual, such as injury, illness, death. Even young people can become ill or die as a result of unexpected accidents, which will automatically generate financial difficulties. Life insurance, unlike normal insurance, has certain characteristics listed below: Financial difficulties in the personal insurance are determined by: needs money for funerals, providing financial resources to the heir(s) after the death of the insured. Some of the motivational factors that lead to the conclusion of personal insurance are: stress, personal motivations, and the concept of death. Risk is defined by most economists as an actual loss, or loss caused by negligence that may have an impact on the individual or on a property. The sum insured is determined by the insured a lump sum based on his needs and financial possibilities. The insured may enter into more contracts of insurance against the same event for different amounts, without being hindered by law or by the insurer to do so. Not having repairman character, personal insurance has no restrictions as property insurance. If, following the occurrence of an insured, the insured suffers an injury or contracted a disease that affected his ability to work, he is entitled to indemnity insurance, making it possible to restore its financial situation existing before the accident or contacting the disease. The premium is the amount of money the insurer pays the insured against the insured risk. The insurance contract is concluded in writing (by completing a statement of assurance). After analyzing the responses, the insurer agrees to contract, contract drafting and submission of a written copy of the insured. The insurance contract is concluded by paying the insurance premium and policy issuance. Insurance termination is performed in the following modes: normal termination is to arrive at the end of the agreed period of time, or period for which it was concluded, the contract ceases also in case of an insured event. But there are less usual ways such as denunciation, termination and cancellation of the contract. Denunciation shall be done by the insurer if the insured has not communicated in writing the contract changes about the data submitted in the conclusion of the contract. Termination means termination of the contract for a while, because of a default of a party for reasons that might apply. The effects of the contract are to be valid until termination. The cancelation of the contract may be caused by inaccurate or incomplete statements made by the insured, or the contractor's lack of insurable interest at the time of its conclusion.

Romanian market insurance reached an unexpected growth in 2012 of more than 8.27 billion lei more than 5.8%, after the decline of the market from 2009 to 2011 which reached close to 12% from 8.9 billion to less than 7.9 billion as stated by CSA. CSA stated that there has been recorded an increase of 3.9% more than in 2011 amounting to a total of 1.9 billion lei of life insurance.

2. Who is it addressed to?

Life insurances are directed towards people that want to maintain a financial balance in case of an unforeseen accident or event. Both companies ( Grawe Insurance and Groupama Insurance ) agree that the unforeseen is part of our daily lives and that the best way to defend against tragedies is to take preventive measures. The first issue to address is to understand to whom are life insurance policies meant for. Our research concluded that, according for both of the companies, their simple life insurance policies targeted natural persons, with a minimum age of 15 and a maximum age of 65 years old. Grawe Insurance has in addition to that a maximum age of cancelation of 75 years, after which all policies will be null and void.

3. What does it ensure?

When looking to buy a life insurance policy it is important to know what that policy ensures, and as explained by the insurance inspectors of both companies, the main object of insurance is the life of the insured. Groupamas defines this object as the safety of a financial support for the family in case of death or the inability to support them. That way in case of an unforeseen event or tragedy the family shall benefit the whole insured amount, which will be constant throughout the whole contractual period. They have a range of life insurance policies available that have as object of insurance either the life of a single natural person or more than one in the same policy, or the wellbeing of a child. Grawe Insurance has a similar vision, in that they believe that the necessity of a life insurance policy increases as the individual perspective and responsibility of a natural person reaches maturity. It can offer the insured a supplementary financial security and can become a guarantee of the future. In order to pick the best life insurance policy suited for the insured, a preliminary analysis of priorities and expectancies needs to be done. Their products include different types such as : Prevent, Start, Profit, Crescendo, Omnia, Risk Life, Renta plus, Sa traiti !, Orizont, Unica, Infinit.

4. What risks are covered?

One of the most important things to ask before completing a life insurance policy with a company is to understand what risks are covered and what are not! In case of Grawe Insurance their simple life insurance(Prevent) policy they insure against the risk of death, death by accident, permanent invalidity due to an accident, and hospitalization costs due to an accident and the survival at the end of the policy. This policy requires medical exams only for insured sums of over 100.000 lei or insured persons over the age of 60 years old. A supplementary clause of death by car accident can be added, and in the event that it occurs the insured will pay an extra amount of premium. Groupamas life insurance policy covers more than the above stated risks, such that it also covers a partial invalidity due to an accident, permanent invalidity due to any cause, hospitalization costs due to any reason, surgical interventions due to an accident, or surgical intervention due to any cause, payment release from premiums in case of the insureds invalidity.

5. What are the indemnification clauses?

These clauses differ from company to company such that Grawe Insurances clauses are as follows: - If the person insured is alive at the end of the insurance contract, the insurer will pay the insured amount to survival ( sum insured by life insurance ) with accumulated profit - If the person insured dies of natural causes, at any period of the contract, the insurer will pay the amount at death ( the sum insured by life insurance ) with accumulated profit - If the insured person dies as a result of an accident at any period of the contract, the insured will pay the sum insured by life insurance - If the insured person dies as a result of an accident at any period of the contract, the insurer will pay three times the insured amount plus the accumulated profit. - If the insured suffers an accident after which he is left with a disability with a degree equal or greater than 50% the insurer will pay directly the insured amount in case of disability and the contract continues without premium payments till the end - If the insured person is hospitalized due to an accident, the insurer will pay the hospital indemnity set for each day of hospitalization. Daily hospitalization has a value of 25 pounds and will be paid for each day but not more than 90 days for the same insured event and 180 days a year.

On the other hand, Groupamas clauses include the following: - In case of death due to an accident, if death occurs at most during 180 days after the accident, and that the body bruises/damage was entirely responsible for the death of the insured. - In case of death and permanent invalidity due to an accident, if the death of permanent invalidity occur at most during 180 days after the accident and that the body damage/bruising was entirely responsible for the death of the insured. - in case of permanent or partial invalidity due to an accident, if the permanent invalidity occurs at most during 180 days after the accident and it is proven that the body damage/harm was entirely responsible for the permanent of partial invalidity. -In case of permanent invalidity due to any cause, if the insured suffers complete loss of the eyes, or is unable to use his/her hands or arms or both tibias or one arm and one foot, if he suffers from incurable traumatic or post-traumatic suffering of the brain that makes the insured unable to do work of any kind, total and partial paralysis, any other types of situations where the insured is permanently disabled, as per the legal requirements in Romania regarding social protection. -in case of surgical intervention due to an accident, if the insured suffers from surgical intervention independently and entirely due to an accident during the insured period as long as the intervention happened at most 180 days from the accident, the insured will receive compensation according to the severity of the surgery such as : small surgical intervention will grant 100% of the insured amount, medium surgical intervention will grant 200% of the insured amount, large surgical intervention will grant 300% of the insured amount, very large surgical intervention will grant 400% of the insured amount. -in case of surgical intervention due to any cause, if the insured suffers from surgical intervention due to an accident or a disease, as long as the intervention happened at most 180 days from the accident the insured will receive compensation according to the severity of the surgery such as : small surgical intervention will grant 100% of the insured amount, medium surgical intervention will grant 200% of the insured amount, large surgical intervention will grant 300% of the insured amount, very large surgical intervention will grant 400% of the insured amount. -in case the insured suffers an accident which requires hospital costs, the insured will receive compensation equal to the costs that they spent during the full stay in the hospital. It shall start to be computed after the 4th day of staying in the hospital due to an accident as long as it happened at most during 60 days of the accident.

6. Exclusions

Each insurance company has a number of exclusions which are mostly related to the submitted paperwork in case of an accident or event or different situation. Grawe Insurance has the following exclusions: - Material misstatements, including omissions or lies of important information would lead to the cancelation of the policy. This includes factors that the company will take into consideration when calculating the premium of if the insured is eligible for the policy. - Suicide is the most common way in which a policy becomes invalid. For this policy exists a clause that states the company will not pay if an insured commits suicide in order to benefit the family. - Private plane crash is another common clause which states that the policy amount will not be paid if the insured dies during a private plane crash. - Dangerous activities are included in the exclusion policies, stating that the company will not pay the amount of the policy if the insured is involved in dangerous activities such as extreme sports and mountaineering, this is removable from the contract but will induce a higher premium. -Illegal activity clause states that the company will not pay the amount if the insured died while performing illegal activities Groupamas exclusions include besides the ones listed above other items such as : If the death is caused by war activities, terrorism participation, or riot participations) . If the death is due to a radioactive contamination due to a nuclear accident. If the death occurred while in a state of drunkness with a alcohol level of over 0.8 to the thousand. If the death occurred due to the insureds excessive use of medicine, drugs or other form of uncontrolled substances. If death was caused partially or totally by HIV infection. If death was caused by a natural disaster. If death was caused by a national outburst of disease or disease confirmed by the CDC.

Ref: 1. Ensight Management Consulting, Insurance Market Overview ( CEE and Romania). 2. Possibilities to diversity of life insurance in Romania, Mirale Cristea & Radu Criveanu. 3. The competitivity of life insurance market in Romania, Radu Nicolae Giosan & Vasilie Ilie, Theoretical and applied Economics 2011 Vol 5 pg 172-181. 4. Groupama insurance agent: Irina Haiducu (sales agent) & website information: http://www.groupama.ro/produse/produse-asigur-ri-de-via/uniplan/asigurarea-de-protectie-in-caz-de-deces-@/article.jspz?id=41807 5. Grawe Romania insurance agent: Nitu Irina ( sales agent) & website information: http://www.grawe.ro/ro/prevent.htm. 6. 2012, A year of challenges in insurance market, Violeta Ciurel. 7. The life Insurance Industry needs to get with the times, Michael Costonis & David P. Shatto 8. Insurance & reinsurance , Dumitru G. Badea Bucuresti , Editura Economica , 2003. 9. Questions and answers on life insurance : the life insurance toolbox , Anthony Steuer New York , iUniverse, Inc , 2006. 10. Principles of risk management and insurance ,George E. RejdaBoston ,Addison-Wesley , 2008.