RIGA - Latvians can finally afford to be safe. Or at least that's what the country's insurance companies - boasting the highest premium rates since independence - have shown.
Balta Insurance, the largest of six nonlife insurers, topped the market with 18.6 million lats (27.9 million euros) in gross premiums - 24 percent of total premiums - subscribed between January and August of this year.
The biggest reason for the high numbers is the recent increase in property investment - be it land, new homes or apartments, according to Balta marketing and PR specialist Antra Roga.
"More people are conscious of their safety these days," Roga says. "There are more private housing and property purchases, and banks are offering better mortgage credit."
Balta's life insurance counterpart, Balta Dziviba, also set a record premium number for the first eight months of the year, garnering 1.28 million lats (and paying gross life claims of 619,000 lats).
Yet Latvia's 18 insurance companies - six life and 12 nonlife - have a long way to go before reaching the level of their EU counterparts. According to Ugis Vorons, vice president of the Latvian Insurers Association and board chairman of Balta Dziviba, the latest numbers show that 60 percent of Europe's total insurance market comes from life-based policies. In Latvia, that number is a mere 6 percent, while in Lithuania it is 22 percent and in Estonia 26 percent.
The gap between Latvian and European life insurance markets is so drastic that for now Latvia's insurers are busy just trying to catch up with its Baltic neighbors. Even market leader Balta Dziviba, with its 2004 industry trophy displayed on the mantle, is years behind its Lithuanian and Estonian counterparts.
Industry insiders are hoping that cheap rates and a changing mentality will help them catch up. "Latvian insurance rates are seriously cheaper than other European countries'," Roga explains. "They are even cheaper than Lithuania's and Estonia's."
As far as basic life policies, the minimum Balta Dziviba offers customers is 10 lats per month for at least five years. This has proven to be the average among clients in the countryside, while those in Riga can afford to pay 30 lats - 50 lats a month for 8 to 10 years.
Other leading companies in Latvia show approximately the same numbers. According to Ergo life insurance, which in the first six months of 2004 boasted a 36 percent market share, the average premium that a Latvian pays is 350 lats - 400 lats per year, which is still low compared to what Lithuanians and Estonians place in their policies.
Vorons believes that Latvia's low premiums have much to do with its political history. "It's strange that the [Baltic] countries are so close, yet the differences are so substantial," he says. "But it's a historical fact that in Latvia life insurance has lacked stable legislation."
Five years ago, Varants explains, the government changed the tax structure for both life and pension insurance due to revenue shortfalls. The state's tax release was drastically reduced, which in turn almost brought the life insurance market to a halt.
"Customers need - they depend on - some expenses from the state," Varants explains. "It's hard enough, for example, to save money for your pension on an annual basis when the state itself is only 10 years old."
However, two years later the state realized its mistake and slowly re-introduced a new tax-release program, but the two-year drop left Latvia far behind its neighbors on the life insurance market.
"We absolutely need a stable situation with the government, then the market will rise." Varants concludes. "It's like a circle. Now the economy is growing back, and the market is very dynamic."
As the market grows, life insurance policy prices are expected to increase significantly. "What life insurance needs is spare money from consumers and overall economic growth," he explains. "People consuming money for their primary needs first, and only after do they start to think about their security needs."
