Insurance sales via Distributive channels Dunav Osiguranje a

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. EFFECTIVE DISTRIBUTION STRATEGIES TO BOOST PRODUCTIVITY AND SALES Margerita Boskovic DUNAV Insurance Company Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Agenda: 1. Structure of channels developed on the Serbian market 2. Focus on profitable channels and actions in that matter 3. Balanced development of internal and external sales 4. Differences between domestic market and foreign market of insurance via distribution channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. . and the most significant indicator is the continous growth since year 2004. Global premium income 22, 6 34, 7 38, 3 44, 8 52, 2 2008 Mill. EUR 580 Life Premium 1, 7 3, 3 4 4, 9 6, 3 70 Share in Global premium 7, 4% 9, 5% Non Life premium 20, 9 31, 4 34, 3 39, 8 45, 8 508, 9 Insurance density Life insurance density Premium share in gross domestic product Estate € 38 € 3 € 55 € 65 € 77 € 80 € 10 € 80 € 10 1, 6% 2, 1% 1, 9% 30, 8 46, 4 56 70, 6 84, 8 942, 2 Net assets 15, 6 18, 6 20, 7 24, 7 25, 3 281, 1 Technical reserve 11, 5 22, 9 28, 9 39, 5 51, 5 572, 2 40 19 17 20 24 5407 7283 7876 9697 11713 2004 2005 2006 2007 2008 Bill. RSD Number of insurance companies Number of employees 10, 6% 11, 0% 12, 2% Trend 12, 2 Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. AMOUNT OF INSURANCE PREMIUM DUNAV SERBIA DUNAV SERBIA Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. TYPES OF INSURANCE PRODUCTS IN SERBIAN MARKET Serbia Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. PREMIUM STRUCTURE Gross premium by types of insurances in the first trimester of 2007. and 2008. quarter I Property Motor Casco Other non-life insurance Life Insurance Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. FINANCIAL CRISIS IMPACT ON THE SERBIAN INSURANCE MARKET • Our financial sector did not operate with complex financial instruments, and was not plagued with so called toxic assets. • IMF forecast: Serbia will record 2% of GDP decrease in 2009; • Activities in the next period should be focused on: ü development and improvement of risk management functions ü UW developing in the selling policies process ü strengthening corporate management, that requires education of insurants and improved sales network, also all kind of distributive channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. CRISIS IMPACT ON INSURANCE - DUNAV Primal strategic directions which contain all of the standard and nonstandard products: ücreating packages - better image of company that offers an integrated product and services üImprovement of cross-selling and up-selling techniques of selling – better focus the on client üdeveloping of distribution channels – to concentrate on comparative advantages Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Agenda: 1. Structure of channels developed on the Serbian market 2. Focus on profitabile channels and action in that matter 3. Balanced development of internal and external sales 4. Differences between domestic market and foreign market of insurance via distributive channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. STRUCTURE OF CHANNELS DEVELOPED ON THE SERBIAN MARKET Sales Channels according to Legal Act: • INTERNAL – sales force • EXTERNAL: -Brokers - 32 -Legal Entities - 65 -Physical Entities - Enterpreneurials - 123 -Banks - 13 -Tourist Agency - 1 -800 Physical Entities licenced in insurance. Additionally, insurers tend to develop alternative channels essential for segmentated clients, various by structure and types of sales and consistant with the needs and comfort aproach to the client. Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS Brokers Lising Unit payment INTERMEDIARIES Associates Tourist agencies Internet Forwarders Agencies and private enterprenours AGENTS Bankassurrance Motor technical inspection points DIRECT SALES – INTERNAL SALES Front desk people FORCE Specific cars service objects Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. TRADICIONAL CHANNELS INTERNAL – SALES FORCE Elements of encouragement ambient in insurance: a)Tax deductions in part that is in correlation with the development of life insurance; b)Expanison of distributive channels - sales force by legal changes that are expected in the following period. Main goal of these changes is to increase the number of employees, it is assumed that 5000 people can be educated in life insurance sales, therefore this can be practised as an additional business (current legal stand inhibit insurers from having any additional practise). Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Agenda: 1. Structure of channels developed on the Serbian market 2. Focus on profitabile channels and action in that matter 3. Balanced development of internal and external sales 4. Differences between domestic market and foreign market of insurance via distributive channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. FOCUS ON PROFITABLE CHANNELS AND ACTION IN THAT METTER Dunav evenly developes external and internal network guided by the following principles: 1. Maximum usage of advantages in internal network expertise (UW capacity, claim adjustment, extended network), with the concern on profitabillity of internal network. 2. Operating with large number of external network sales – conditioned by the structure and client demands as well as actions on the market; 3. In the process of Company transformation focus has altered from product to client. Client segmentation has conditioned defining sales channels determening which is the best way of aproaching a certain client category. Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Maximum usage of advantages in internal network expertise • Internal network – 30% in the MOT area and 50% in other types of nonlife insurance • Main objective is to increase sales via internal network using the following tools: ØSales plans and defining product mix (for empolyees) ØCross sell tehnique, education ØRecuperation of businesses that maintain MOT’s ØInvesting in our own capacity, in developing our front desk sales, instalation and purchasing new Tehnical inspections (MTPL) of the highest standards Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS Client Segmentation and distributive channels eligable for sales: Individual segment Small and medium businesses segment Large Commercial Clients “Dunav” Sales network MOT’S Independent Agents Municipal utilities Associations Travel agencies Call centers Internet Banks Mobile phones “Dunav” Sales network Independent Agents Brokers Leasing companies Associations Call centers Internet Banks “Dunav” Sales network Independent Agents Brokers Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS PRODUCTS BY SEGMENT Individual Small & Medium Large comercial Businesses utilities Products / Segment Automobile liability insurance Hard Asset General liability Accident Travel insurance Life insurance Pension insurance Health insurance Product liability Farming insurance Marine insurance/Cargo Machine breakage insurance Group Accident insurance Group Health isnurance Group Life insurance Group Pension insurance Main product Aditional product Periodical product Unnecessary product Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS AND PRODUCTS BY SEGMENT: INDIVIDUAL Product importance Products Sales Vehicle Agents Brokers network. Inspection (independent) "Dunav" Companies/ Leasing Municipal Banks Associations companies Utilities Call centres Internet Travel agencies Very important Automobile liability insurance Very important Estate Very important General Liability Medium important Accident insurance Travel insurance Less important Life insurance Less important Pension insurance Less important/out Health insurance Medium important Product liability Very important Medium important Marine insurance/Cargo Machine breakage Medium important insurance Farming insurance Very important Group Accident inurance Less important/out Group Health isnurance Medium important Group Life insurance Medium important Group Pension insurance Main channel Additional channel Periodical channel Future chanell Unnecesary channel Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS AND PRODUCTS BY SEGMENT: SMALL AND MEDIUM BUSINESSES Product importance Products Sales network. "Dunav" Vehicle Inspection Agents (independent) Brokers Companies/ Leasing Municipal Associations companies Utilities Banks Call centres Internet Travel agencies Very important Automobile liability insurance Very important Estate General Liability Very important Accident insurance Medium important Travel insurance Medium important Life insurance Less important Pension insurance Less important/out Health insurance Product liability Medium important Farming insurance Medium important Marine insurance/Cargo Machine breakage insurance Group Accident inurance Group Health isnurance Group Life insurance Group Pension insurance Main channel Additional channel Periodical channel Future channel Unnecesary channel Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DISTRIBUTION CHANNELS AND PRODUCTS BY SEGMENT: LARGE UTILITY USERS Product importance Products Sales network. "Dunav" Vehicle Agents Brokers Inspection (independent) Companies/ Leasing Municipal Banks Associations companies Utilities Call centres Internet Travel agencies Very important Automobile liability insurance Very important Estate Very important General Liability Accident insurance Travel insurance Life insurance Pension insurance Medium important Health insurance Product liability Very important Medium important Less important/out Medium important Farming insurance Marine insurance/Cargo Machine breakage insurance Group Accident inurance Group Health isnurance Group Life insurance Group Pension insurance Main channel Additional channel Periodical channel Future channel Unnecesary channel Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Agenda: 1. Structure of channels developed on the Serbian market 2. Focus on profitabile channels and action in that matter 3. Balanced development of internal and external sales 4. Differences between domestic market and foreign market of insurance via distributive channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. SHARE OF EXTERNAL SALES CHANNELS IN COMPANIES GROSS PREMIUM External sales channels gross premium: 7. 353. 358. 000 din. Companies gross premium: 15. 142. 985. 426 din. Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. BALANCED DEVELOPMENT OF INTERNAL AND EXTERNAL SALES What determens insurance market in Serbia is high presence of Motor third personl liabillity (MTPL) – 30% of the total premium is generated from MTPL. Sales structure of MTPL: • 70 % via external sales channels – agencies and tehnical inspections (MOT) • 30% is sold via internal network. Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. BALANCED DEVELOPMENT OF INTERNAL AND EXTERNAL SALES The only way in conducting a concept of enhancement market share and cost decline is investing in our own capacity: • Front desk sales üFront desk invesments üDevelopment of Precompensation system • Sales channels of „Dunav Auto“ üRecuperation of businesses that maintain MOT’s ü Instalation and purchasing of new Tehnical inspections in cooperation with „Dunav Auto“ Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. Agenda: 1. Structure of channels developed on the Serbian market 2. Focus on profitabile channels and action in that matter 3. Balanced development of internal and external sales 4. Differences between domestic market and foreign market of insurance via distributive channels Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF INSURANCE VIA DISTRIBUTIVE CHANNELS • Brokers – relatively new channel on Serbian market • Problem characteristics of MTPL – MOT • Banking insurance is used for non-life products selling Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF INSURANCE VIA DISTRIBUTIVE CHANNELS • Brokers – relatively new channel on Serbian market Preferences: Ø Rarely extrapole for physical entities Ø Mostly clients are taken by the insurer Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF INSURANCE VIA DISTRIBUTIVE CHANNELS • Concerning Tehnical inspections Øobsolete Motor pool (around 2 million vehicles – average of the vehicles is 12 years) ØMOT’s are conducted every year Øappliance of the new legal act that standardise the rules of tehnical inspections (MTPL) Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF INSURANCE VIA DISTRIBUTIVE CHANNELS • Bankaassurance It still in its conception allthough in the end of the year 2006. it was enabled by an legal act for the banks to do business in presenting insurance. Characteristics and variety in relation to the foreign market: a)This sales channel is more succsesfull in non life insurances and thereby is uprising; b)Life insurances are sold less trough this channel for multiple reasons: • Low level of developing in life insurance due to historical reasons (inflation, war, etc); • Life insurance policy is not a liable element with credit products. Productivity trough banks sales is 2 times larger in relation with the traditional agent network. Vienna September 2009.

Insurance sales via Distributive channels – „Dunav Osiguranje“ a. d. o. DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF INSURANCE VIA DISTRIBUTIVE CHANNELS Asumption for good cooperation between Banks and insurers is contribution and benefit for both sides. Foreign insurers in cooperation with foreign banks that are present on the domestic market use the same mechanism and similar is with the leading domestic insurance „Dunav Osiguranje“. Partner Bank Insurer Client Provides Gain • Brand • Client base/distribution • Complementary products • Cross sales income • Additional barrier of client exiting • Expertise in insurance and damage costs • Capacity in risk bearing • Brand client base access • Margin on the core business • Loyalty to the Brand • Keeping record of other products • Adapted products that provides magnitude for money from a reliable provider of services Vienna September 2009.