homepage_name! > Editions > Number 037 > Interview - Branko Krstonosic


Branko Krstonosic, President of Board of Directors, Wiener Städtische Insurance

Wiener Städtische Insurance is a part of Vienna Insurance Group, leading Austrian insurance company in Central and Eastern Europe, with tradition of more than 185 years in business.
Combination of economic power, expertise and knowledge have brought confirmed quality and safety to the market, providing them with leading position in life-insurance, and being among leading insurance companies in the domestic market with entire portfolio.
The mission of the company from the beginning has been to create and develop culture of insurance and provision of services, the quality of which fits modern global business standards. Therefore, they have been constantly developing products in compliance with concept of European modern insurance, adjustable to needs and requirements of local market.
Wiener Städtische Insurance realized gross invoiced premium amounting to RSD 4.89 bn in the last year, being 8.91% increase.
Total balance amount amounted to RSD 11.5 bn at the end of 2010, and was higher by 25% than in 2009. Life insured were distributed high profit amounting to RSD 142 mil.

About great results, met business plans and new ideas in Serbian insurance market, for PROFIT magazine we are talking to Mr. Branko Krstonosic, BoD President of Wiener Städtische Insurance.

The company was established as “Greenfield” investment of Vienna Insurance Group Wiener Städtische Versicherung AG.

Mr. Krstonosic, where were you born? Where did you go to school?

I was borne in Slavonska Pozega in 1950. My mother was there I was about to be born. I finished schools in Belgrade, elementary school, 4th Belgrade High School and graduated for the Faculty of Economics, before 1973. After that, I asked for permission to leave to the seaside, and then to get a job. After my return I soon got a job. Wherever I applied, they wanted me to work for them. And then I chose Dunav.

Did you choose Dunav because they told you to come and start working for them instantly?

It was the main reason. Then, I stayed at insurance industry permanently. I got job at Dunave 6 months after it was established by merging Beograd and Jugoslavija. When I started to work, everybody kept on asking me where I was from, and I kept on telling I was from Topcider, Savski venac.

They all gave me harsh looks and thought I was not serious, because the only answer they expected was either from Beograd or from Jugoslavija. They got acquainted, and it was important to know where somebody is from in such context, from which company.

You stayed at Dunav for about ten years? Where did you work then?

More accurately 14. Then, I worked at Evropa Internacional, and then at Wiener Städtische Insurance.

How did you come to Wiener Städtische Insurance? How did you actually make a decision to work for them?

They invited me to come to Wiener Städtische Insurance and I accepted, at the time of establishment, meaning I have been here from the very beginning, from 4th of February 2003, when the eight of us started working.
Have you been BoD President from the first day or did you hold other position?

I have been in this position from the first day.

Why is your insurance company different compared to competition in Serbian market?

The Company was established as the first Greenfield operation of any foreign investor. The founder, Vienna Insurance Group, is an insurer with significant business reputation in the CE Europe. Based on such experience, assessment of business perspectives in this market was conducted. Then, normally, it was expected that parent-company should transfer some of its performances to a daughter-company, therefore, from the very beginning, we have been oriented towards development of, unfortunately still underdeveloped, life insurance and have been oriented towards small - and medium-sized enterprises.

So you differ by that from other insurance companies?

It was specificity at the beginning. Now, there are a lot of similarities among competitors, since business environment have changed. Once large systems terminated by privatization, therefore everything fragmented and small - and medium-sized enterprises are predominant, which is good. It is one of indicators of market development and reason for orientation towards small- and medium-sized companies.

What new insurance packages do you offer this spring for your clients?

Not this spring only, but we plan implementation of new products every business year. Of course, it is done carefully, in order not to disturb what already exists, so it is very often variation of present products, and new ones are implemented carefully, considering sensitivity of the market. It should not be forgotten that insurance is functional depending on the developments in the environment, on trends therefore, we weigh what to launch in the market. If demand has insufficient “elasticity”, irrespective of excellent products, sometimes it is better to wait before launching new products. Still, even under such circumstance, we have implemented two products, basically having in common the fact that they can be seen as product identifying us as socially responsible players in this market, because one product particularly supports birthrate and care for children. I would like to mention, in the context of these activities, that one of key focuses of our Group is on child and youth care. Second product is supporting ecology. We have made a special product, especially privileged car insurance, with under average rate of environmental pollution.
How do you asses the market?

Mostly though standard surveys, but there is a global indicator – questionnaire.

What are questionnaires saying? What is Serbian market like?

Serbian market is not developed and it is the major problem.

There is no greater problem for insurance than to overcome its own underdevelopment.

What is actually underdeveloped? Which segment?

If you observe an insurance market as a structure, then there is not a single developed segment of such structure.

Where should be started from?

It should start from the base, from observing characteristics of opportunities. Insurance business, opportunities are inhabitants, when speaking of personal insurance.

Industry is also an opportunity. All that should be assessed and found out about the situation and started from that point.

Do we have opportunities in Serbia?

There are opportunities in Serbia, which is proved by large number of insurers, founders of which are from developed markets. Nobody has a dilemma about existence of opportunities. But, the major problem is how to use such opportunities. Characteristic of our opportunities is a lack of insurance-awareness. It is always seen as forced costs, preferably eliminated.
Is the situation in the world the same, or is insurance the least important item in our home budget only in our case?

It is a characteristic of underdeveloped markets. When underdeveloped, what I am talking about occurs. Absence of awareness that insurance is issue for all times. Life insurance is concluded for long-term. When you have chosen an arrangement like that, you do not do it for short-term effects, but you watch on long-term basis, the effect after termination of the engagement. Definitely, underdevelopment of the market is the biggest problem and it cannot be overcome by partial activities.

How does the market function? What does the Government say? Do the law provide base for good system functioning?

System functions since the new law was reached in 2004. It is much more organized field than it used to be. Earlier, there was a characteristic of chaos and disorder, besides underdevelopment. Now, it is very well regulated market, from the point of legal framework. What is missing is a proactive role of the Government in encouraging insurance development. Standard form, practically confirmed in the developed markets, show how Government reacts there, and those are generally the best instruments – tax incentives for insured. Those are very simple forms of Government activities.

For example, the Government provides tax incentive for premium the client has chosen. Based on that, insurers increasingly develop insurance, collect premium. The Government then issued securities that are purchased by insurers, realizing safe investment and good return for the client. After the expiry of period of contract, based on that, contracted sum insured will paid to safely. The Government is provided with resource of long-term assets of good quality, using them for realization of infrastructure projects.

Why is a problem to realize that, when everything sounds so simple and logical?

Unfortunately, problems are present everywhere, and if something is underdeveloped, it is problem by itself. As illustrated, what is the problem: firstly the Government has never issued long-term securities in euro so far. We have managed to succeed within a year and a half of conversations with Government, to contribute the fact that the Government issued on 14th February, EUR 100 million of bonds with maturity period of 15 years. Insurers bought about 50% of that.
The second step the Government should make is tax incentives, but at this moment there are no such moves, which could be explained in several ways. So, it is not decisively excluding attitude. Simply, everybody has own priorities, some things are more important, and some are a bit aside. Personally, I am of opinion that the Government is a bit aside, because if somebody has a budget deficit, the one will not decide easily to decrease taxes.

Could you comment a problem of separating life and non-life insurance? What is all that about and how it would affect operations of your Company?

In 2004, the new law came into force stating that, anybody who wants to register for insurance business in this country registers separately a company for life insurance, and the other for non-life insurance, if wants. Now, there are insurers in the market under the same name, but with two companies, one for life and the other for non-life insurance.

The issue here is what to do with those who, at the time of reaching such law, found themselves in the position to be composite companies. Then, legislator promised to introduce a transitional period, within which will be operated, without separations. Of course, insurers who found themselves, just like Wiener Städtische, as composite companies at the time of reaching such law, are of opinion, quite reasonably, that they should stay in the same form, simply because everything else is much adverse, and the Government as legislator must be governed by the principle not to make things worse. To that sense, we had very serious argument against separations. We expect those arguments to prevail in the final attitude not to make separation.

What is the situation like in Austria and in other markets?

Status quo was not changed, neither was in Austria, Croatia and all other neighbouring markets. Additional separation of composite companies will result in significant increase of costs and in end result clients will suffer, and we have so little clients, after all.

The market is underdeveloped, and another step leads towards direction opposite from the need to accelerate the development.

How many people does Wiener Städtische currently employ in Serbia? How many people are there in your team at the top of the Company?

We had around 1043 employees at the end of 2010. They were all employed between 2003 and 2010. Nobody can deny excellent contribution to that context. We have very good structure of employees under all performances. Since we are closed joint stock company, a Board of Directors consisting of 5 members is at the top of the Company.

Are all members of the Board from this region?

At this moment, they are all from our country, which is very rare and compliment to our management.

How do you invest in education of your employees and how much is that item important for the business of your Company?

Our business is based on people. Our employees are our most valuable resources. We are dedicated to equity, mutual understanding, transparency and sustainable relationships. Our ambition is to create attractive business and working environment, in order to secure our success. We invest systematically in professional development of our employees and we create conditions for their personal creativity affirmation, as well as inventiveness. We invest in trainings pursuant to assessment of skill, knowledge and competences of an employee, which are in accordance with job requirements.
How the issue of insurance terminology can be solved, in order to be more understandable for majority of people, since many people do not understand it?

You are absolutely right. When we just say insurance, it is not clear what it means, so it is mixed with health or pension insurance, therefore, at the very beginning there is a serious problem not to know what we are talking about. Permanent education is necessary, in order to overcome such problem. Lack of understanding is potentially the most serious cause of future misunderstanding and conflicts. Since nobody wants that, education issue becomes more important. On the ways to overcome lack of understanding is to create numerous sales and representative structures, being more adjustable when using terminology which clients can understand.

Did global economic crisis effect Serbian insurance market and how?

It should be kept on mind that insurance is functionally dependent on industrial development. If standard of people has grown, insurance develops. If commercial growth is dynamic, insurance develops and vice versa. But insurance, belonging to sector of finances, less suffered adverse effects of crisis than it was a case in real sector.

But you have recorded growth, despite of crisis. What was the plan and what was realized during the previous year?

The plan for 2010 was slightly more ambitious compared to results, and results, again, are dynamic, better than in 2009. We recorded 8.91% growth compared to the previous year. When we know that the market had total growth of 5.58%, that means our growth was bigger than growth of the market. We have increase market share and we are still the fourth insurer pursuant to value of gross invoiced premium.

How do you invest assets of insured to provide safe return?

Our Group has traditional and conservative approach, to take care that investment are primarily safe, return satisfied and expected compared to what has been interpreted at sales negotiation. Considering the fact that we have almost 40% share in life insurance, making us more obligated since those are arrangement lasting for 10 and more years, our investment are concentrated to be almost 100% in euro and invested in restricted f/x public savings bonds, state long-term securities and bank deposits.

Your company particularly emphasizes customer care. How do you take care of your clients?

Client is, indeed, at the first place, and one client is in the focus for a long time, considering those are long-term engagements. All effects arise after long period, therefore, such focus become permanent customer care. Insurer not having a client in the focus and as the most important cannot assume success.

Social responsibility and helping local community is one of priorities of Wiener Städtische Insurance and you often participate in different actions. What actions have you taken and what are your plans?

I have mentioned we have products with such characteristics, that we can be recognized as socially responsible company. We do tend to be active in that sense; first, we pay our attention to children, culture and education. In specific cases, when they occur unfortunately, we participate actively with no limitations. The examples are calamities such earthquake in Kraljevo, when we quickly responded and secured temporary lodging for 3 families. I hope we can be recognized to that respect.

The only safe investment actually is investing in our children. What does Total Insurance offer?

First of all, it is a products adjusted to parents’ need to provide their children with long-term complete safety. Until the child turns 15, they are secured with basic insurance package having character of savings, and after the expiry of such period, it is transferred to mixed life insurance. Accumulated funds can make future insured’s choices in life easier. Besides, considering increasing interests of public in donating stem cells, considering cooperation with leading stem cell bank Cryo Save, we have provided, within the package, discount on the price for depositing stem cells. Discount of 20% on the amount of insurance premium in the first year is also provided for concluding Total Insurance package and there is option to be exempted for paying the premium in the last year of insurance.

What are the business plans of Wiener
Städtische Insurance for this and the next year?

Generally we make three-year projections, focusing, of course on the following year. Goals for 2011 are more ambitious than they were for 2010. We focus on additional development of life insurance. Concerning non-life insurance, we have ambition to develop particularly that segment, focusing on property insurance development. Growth rate plan is approximately 14%, showing ambitiousness and expectations that realization of such rate will again result in increase of market share.

If you could, what would you change in your present career?

I would not change a thing.

How do you spend your spare time?

I spend my spare time with my family, and I like nature, so I spend majority of year, from spring to winter, at the Danube. I am active there, and it fulfills me. I like the river and fishing.

Have you ever had a wish to live in some other city, apart from Belgrade?

When I was younger, I used to think about that alternative, at the time when I was a student. I wanted to live in Banja Luka or Novi Sad, but reasonably, I think Belgrade has no alternative in my case, at least not at the time when I have to work.

After that, I am not sure that longer stay outside Belgrade will not be good for me.