The multi-faceted insurance industry
The insurance industry has had something of a tumultuous
time of late with the customer becoming ever-more discerning, the problems
associated with insuring young drivers and a number of issues affecting
overseas principals. Rausi Insurance Agency Managing Director Jovin
Rausi gives David Lindsay his opinion on a wide range of industry-related
Rising from the ashes of Prudential’s withdrawal from Malta, Rausi Insurance
Agency, headed by Jovin Rausi and his son Nigel , has come a long way.
Today the agency, with Lloyds as its principal, deals and transacts
in all types of insurance business. More recently, Rausi Holdings was
set up to sell Middlesea Valletta life assurance policies , a move necessitated
by legislation preventing insurance agencies from doubling as sub-agents.
In an industry in which competition is always on the increase, being
in a position to offer any product requested by the customer is of paramount
Jovin Rausi elaborates, "In insurance you have to create a one-stop-shop
philosophy in which a client comes in and you are able to satisfy all
his or her insurance requirements, whilst being competitive and delivering
a good service in the same stroke.
"Today’s client has become more discerning and some would change
agencies over very small price differentials. Others, however, are more
loyal - they look at the service we give and the way that we deal with
claims. These factors have become very important to a great number of
people, just as important as the premium in many cases. I do see the
customer becoming more demanding, but also more intelligent and educated
when choosing policies, a development that we, as an agency, welcome."
With Malta becoming part of the European Union next year, what legislative
measures are there for Malta’s insurers to contend with?
"Legislation is a level playing field, in that each agency will
have to abide by the same rules. Of course, in today’s scenario of globalisation
and now that we are joining Europe, we will have to comply with regulations
from beyond our shores.
"There have been regulations affecting our principals due to the
fact that they are already within the EU. We, of course, will also have
to comply with those same regulations once these rules come into play
"One such rule being gradually implemented concerns the ‘green
card’, or extended cover for travelling abroad. However, when we join
Europe there will no longer be any such thing as all cover will become
EU-wide. Being automatically insured across the entire EU is, of course,
good for the client. But, as for us, when it comes to claims we will
be open to claims as they are in Europe, not as they are in Malta. So
there is the good and the not so good, but you just have to move ahead."
There have been a large number of mergers taking place on the international
and local insurance markets. I ask how these changes in the lay of the
land have affected Rausi.
"These developments have not yet had an impact on Rausi’s operations
since we work for Lloyd’s, despite the fact that there have been a number
of mergers taking place within Lloyds itself. Most of these mergers
have taken place between syndicates, which means the availability of
syndicates to write our business has been reduced.
Continues on page 22
Continues from page 11
"We’ve been profitable, which is our biggest asset, but then again
it is inevitable that one day we too will be touched by this trend of
merging. It has happened in Malta that foreign principals have merged
and strong local competitors have found themselves in a situation where
they may become partners under one principal. In today’s increasingly
globalised marketplace, companies seem to want to become bigger and
bigger and it would seem we might eventually end up with one insurer
insuring the entire world," he adds with a chuckle.
Rausi Holdings was set up some two years ago to act as life assurance
sub-agents, an area many at Rausi, including Jovin Rausi, have had ample
He explains, "This aspect of the business is doing quite well because
a lot of us have been involved in life assurance for many years, myself
for the last 43. So selling life was my first real love, and still is
in a way. A lot of our clients still come to us for insurance to cover
bank loans, for example, and now with today’s pensions issue, people
are beginning to rethink these policies.
"Nowadays people are starting to get worried. They come back to
us and say ‘look, I’ve been hearing a lot about this pensions business,
will I have a pension’ and they are thinking about doing something about
The pensions dilemma goes back a long way with Mr Rausi, back to the
late 1970s when he was with Prudential, administering their local pension
He explains, "Up to 1979, when I was with Prudential, we had a
very large number of private pension schemes in Malta. But in 1979 legislation
was introduced that ensured everyone would have a two-thirds pension.
This was a very good step in itself since before 1979 it was either
up to the employer to have a pension scheme for his employees and it
was also up to the employee whether to form part of such schemes. There
was a government pension scheme in place at the time but it was meagre,
let us say it was poor man’s pension, and there was no system in place
through which you could get a two-thirds pension.
"So government introduced legislation that said national insurance
contributions would go up tenfold but everyone would receive a two-thirds
pension, which was good. But in the same breath it said that if you
have a private pension scheme, you would not be eligible for the two-thirds
"So overnight all the private pension schemes that had been in
force and which were even approved by the Commissioner for Inland Revenue
had to be scrapped. At that point in time, the country had an ideal
opportunity to introduce the two-thirds pension scheme, while also leaving
private pension schemes in place, but it missed the opportunity and
look where we are today.
"But we all know the result of that. Everyone scrapped their private
pension schemes in expectation of their two-thirds pension and the situation
today is that government is saying it will not, in all likeliness, be
able to pay a two-thirds pension, especially if you have a certain income.
"What we have today is, in reality, a situation created by the
politicians. To be fair, the pensions problem is a global one and is
by no means restricted to Malta. What is happening today is that salaries
have gone up to, as an example, to Lm10,000 for a senior position. Two-thirds
of that is Lm6,000 and even if that senior position holder had a private
pension scheme before 1979 and has a deferred pension that would be
paid now, the government may not pay him the government pension he is
entitled to because he still has a pension from his previous employer.
That person is still paying Lm1,000 a year, ten 10 per cent of his salary,
toward a government pension scheme from which he might get very little
or even nothing. In my opinion that is unfair and totally immoral.
"How can you tell someone who is paying Lm1,000 a year that he
will not be paid a pension because he still has a residue pension from
back in 1979? Don’t forget these people are still paying Lm1,000 a year
and they have nothing, or very little, to look forward to from the government.
"The real bottom line here is that government has done nothing
about this state of affairs since 1979. If you were 50 or 55 five years
ago, it would be impossible do something about it now. It’s too late
even if you’re 40 today because to start working on a decent pension
you would need a cash injection of Lm50,000 as you simply cannot possibly
earn and save enough to create a good pension between now and 65.
"The pension situation at the moment is very serious and, unless
immediate action is taken it will become even more serious."
One other ailment affecting the insurance industry on a global level
is the low availability of reinsurers following the many catastrophic
losses such companies have seen world-wide over the last few years,
which have catalysed tremendous rises in reinsurance prices.
"However," Mr Rausi explains, "the problem is not only
the price, but the availability of these reinsurers. Although the increased
price of reinsurance is a major problem, the larger problem is when
you go to a reinsurer and you are told they are at full capacity and
cannot reinsure you.
"This problem makes its way all the way down the line to the clients.
If the insurer has to pay more for his reinsurance, that will trickle
down in the end to the end-client. In the last two years this problem
has gone from bad to worse and it is affecting a lot of insurers in
Malta and overseas alike.
"Fortunately Malta is not considered to be in the ‘earthquake’
zone, although we are on the verge of it. If we were to become considered
as such, the face of property insurance in Malta would undoubtedly change
Another aspect hitting local insurers, and news headlines, of late are
the problems related to insuring young drivers.
Mr Rausi delves into the difficult issue, "Young drivers are a
constant source of concern to most insurers in Malta, simply because
of the high risk element they present. This, sadly, has always been
the case and I still remember losing friends in car accidents back when
I was a teenager, in the cars they were making 40 years ago, let alone
with the powerful cars being driven by 18 and 19 year olds today.
"Of course there are accidents and there are accidents. A bumper
to bumper incident is an accident, perhaps avoidable, but nevertheless
an accident. But then there are the other accidents in which mostly
young people are involved. Why should a young man with a powerful car
turn a sharp bend at 60-90 miles an hour? That to me is not an accident,
it’s looking for trouble.
"Apart from being a major worry for family and friends, this is
also a concern for insurers since no amount of premium could ever turn
a bad risk into a good one. Of course not all young drivers are irresponsible
but the few careless drivers have given the good ones a bad reputation.
The issue of insuring young drivers could become more of a problem in
the near future, unless the situation improves. And this can only be
done by making young drivers aware that there could be one day when
they will not find anyone to take on the bad risk and insurance for
them will become very difficult if not next to impossible to find."
But, apart from these issues, Mr Rausi sees no earth-shattering changes
imminent in the insurance industry.
He explains, "The local industry has reached the stage at which
the individual needs of the clients are being met.
"There are changes on the horizon, with Malta joining Europe, the
young drivers’ problem and the effects of issues pertaining to our principals
in the UK such as the reinsurance problem. We all seem to be waiting
to see what’s going to happen next will our principals find reinsurance,
will they increase our costs, will there be more international mergers
that could affect us?
"Whoever said that insurance is boring?"