When Otto Bismarck set at 70 the retirement age in the newly founded pension system of Prussia in 1889, the life expectancy at the time was 45. Consequently, the country’s pension system was fully funded. Today, people usually retire between 65 and 67, depending on the country, but life expectancy has increased to 80.
Apart from the problems that are created in state insurance systems from this simple fact, another obvious consequence is that «people need to start saving earlier in order to ensure they have adequate pensions,” says the CEO of International Insurance NN Group Robin Spencer. “Moreover, the extension of life expectancy not only creates increased savings needs, but also creates equally increased care needs; as people want to be healthy throughout their life course, especially in their advanced ages,» he tells Kathimerini.
“The only way to combine the need for increased savings and care in respect to the reduced existing income in all European countries, is to offer more economical products to consumers,» says Spencer, explaining the aggressive return of the NN Group after completion of the Dutch Group’s restructuring plan. The economic environment is characterized by high uncertainty not only for insured people, but also for the companies themselves. The low interest rates make high returns prohibitive. In combination with high market volatility, this creates a difficult landscape for the insurance industry, which is forced to find a balance between meeting the increasing needs of consumers and market uncertainty.
Six years after the beginning of the restructuring program, which marked the provision of state aid of 10 billion euros, the insurance division is trying its complete the process of weaning itself off from the ING group, moving also to the change of its name to NN. The renaming is only the last step in this process, characterized by the separation of the banking group, the insurance, and the sale of large units in the US, Latin America and Asia. This independence would not be possible without the prior repayment of the Dutch state in 2014, bringing to the Dutch government an annualized yield of 12.7 percent, profits of 3.5 billion euros over the course of six years. As Spencer notes, a key step in the independence process was the group’s IPO last year, when it offered 32 percent on the Amsterdam Stock Exchange. The ING group has now further reduced its holding in NN Group to 54.6 percent, while the reorganization plan provides the release of the two shareholder groups by the end of 2016.
Gaining some distance from the past does not mean turning denouncing it, though. According to the head of operations in Europe and Japan, the insurance group is reestablishing the NN name, a brand that was never forgotten not only in Holland, but also in a number of other European markets in which it operates, such as Greece. Studies in the Greek market have shown that NN is a recognizable brand to 75 percent of its customers.
The rumors noting that the operation in Greece will be for sale as part of the group’s restructuring process have proved unfounded. As Spencer explains, NN is maintaining and enhancing its subsidiary in Greece by redesigning its products so that they are accessible to Greek consumers who have seen their incomes drop dramatically. «The long-term health contracts were not a realistic option, both for the company and for the consumers, who were unable to pay the cost of these contracts,» he notes.
“Switching to annually renewed health programs was a better option as the company has maintained its customer base, achieving a 75 percent increase in new sales.» The rationalization of the health sector in Greece, which is the only market in which the NN group provides full hospitalization programs, was a crucial business option. So much so that the health sector is now included in the company’s strategic choices, which will be evaluated as a basis for the other European markets in which the group operates. “We are not talking about extending the same model,” says Spencer. “The coverage of customer needs, not only for pensions but also for health matters is something that the NN group should seriously consider in the near future, providing full protection to the insured.”
At the same time, the reverse in the trend of customers liquidating their life insurance policies is an encouraging sign. “The company’s goal is to give people the opportunity to save more, through a mechanism that will allow them to invest in capital markets, while ensuring the protection of their income,» says Spencer. NN is redefining its policy by launching later this month – through the Piraeus Bank network and through its network of partners – a new investment product of periodical payments, which safeguards the customer’s asset but also the annual performance by closing the profits which are capitalized on the invested capital. «This is a product designed almost five years ago in the UK, in the form of one-off payment, but it took about three years to be adapted to modern needs and to provide a convincing investment proposal in the form of more systematic saving,» says Spencer.