ERGO «feels no fear for Baltics»

Photo: Liis Treimann

ERGO International AG board member Thomas Schöllkopf in charge of Eastern Europe says they go cautious in Russia and Ukraine due to their conflict while not worried and confident in the Baltics. 

-What are the options you see regarding the Baltics while Russia is acting nervous and we are all affected by the crisis at EU southern border, as well as the Greek struggles and the cooling of Chinese economy? How does that impact your business decisions in Estonia?

It must be kept in mind that both politically and economically we Germans honour the EU values. Luckily, there’s no difference here between large and small nations. For us and for the EU, unity is very important. I am convinced that the Russian President Vladimir Putin is also aware of that.

During these past 25 years, we have undergone tremendous change. Looking back in time, Russia and the USA once determined the market. What we have on the map now are the EU with 480 million inhabitants, China and India.

In the situation where EU and USA are forming one block, and China and India the other, we need to see how the market really is developing. The EU is no longer just Germany and Italy, for instance.

-How do you see the Baltic States to that backdrop?

When I visited the Baltics last year, there were lots of questions about what your politicians would advise to do to save Greece. The way that the Baltics exited the crisis was greatly appreciated: tough measures to raise taxes and to cut salaries. People feared that, but seeing the outcome it was laudable. But you must consider that the Greek condition is far from the lows of just a year ago. The situation that was damaging the economy of Italy, Spain and Portugal is improving.

Regarding the impact of what is happening in Asia, we cannot foresee that as yet. But it is of much greater significance to us what is going on in Ukraine. Let’s see, for instance, how the war of the 1990ies in former Yugoslavia affected people. Visiting the cities in Bosnia, for instance, one can see it was not just a generation that was hit, but the impact has been long-term. Applying that to Ukraine – which was already in a situation more complex before the war – this will probably last for decades.

We have very little business in Ukraine. We are not expanding, we just keep it on the current level. We will never be afraid for the Baltics. This will also sound like a promise tour customers that we will not be leaving.

-How does the relationship-crisis affect your business in Russia?

Naturally, the business in Russia has been affected the most as the Russians have ceased from travelling. There’s not the volume we used to have in travel-related services, the green card business, and new car purchases are falling.

We are still growing in Russia, but the results are far from what they used to be. The rouble keeps depreciating, but our cost base is in euros. By the realisation of currency risks alone, we have lost almost eight percent of our profits.

-Operating in Russia, do you feel any additional pressure in addition to the economic situation? Might they, on top of the foreign foodstuff, be also beginning to restrict financial services by foreigners?

We feel no additional pressure whatsoever. For Russia, the bad economic situation and the low oil price are not easy. Even without the extra restrictions, things were not good.

Probably, foreign insurance companies are not too vital for the Russian system. While we are diligently paying the fees related to our clients, the removal of our licences would simply mean our clients would lose their money.

-Am I getting it right that as long as the Russian crisis persists, your company will undertake no major changes in the Baltics?

For me, ERGO’s 16.9 percent market share in Estonia is totally satisfactory. For ERGO, it is important to offer our clients all insurance-related services, we are obliged to do that. But we do that in a focussed way. If we invest in information technology, we do it in areas where we see potential profit growth.

From the large market share in Estonia, it is more difficult to expand than in such states where we only have two percent, say. We are very happy over the state of our business in the Baltics, especially in Estonia. The companies here give lots of ideas to our group, especially with digitalisation of services.

-Last year’s report says ERGO enjoys a high 2nd place in Estonia, but why aren’t you at equally high position with all forms of insurance such as medical insurance?

That’s due to the market strategy we have opted for, differing from state to state. I am happy about our Estonian company, they are doing a good job. When the financial crisis dropped the marker buy nearly a fifth, our company lost more. It was because we deem it more important to keep profitability.

By long-term profitability, we are able to offer more to our customers as we are able to invest in IT, for instance. For the sake of profitability, we were up to now willing to give up market share, but we are back on the wagon now. In a situation like this, naturally one must rearrange one’s portfolio. We still have traffic and [the voluntary] Casco vehicle insurance as the bulkiest service we have, but we are increasingly focussing at asset, business and life insurance.

Health insurance is somewhat different of a domain as Estonia’s healthcare market is significantly different from other Baltics, as well as from lots of other nations in Europe. Estonia’s public social insurance system and availability of health care are highly developed, leaving not much room for private insurance.  

-What are the hindrances to offering private sickness insurance in Estonia?

The Estonian system is so consumer-friendly that there’s not much playing room for private insurers. When in Greece, for instance, people need to pay half of treatment costs from own pocket, they are in trouble when not having purchased the additional private insurance.

With a system like that, you get the best advice and the best treatment only due to private insurance. In Estonia, that’s not an issue at all.

Even foreigners need to have the mandatory sickness insurance when staying in Estonia even for three months. Meanwhile, Estonia is so small as to also set certain limits to developing the business. Insurance business is also affected by the domestic economy – when it grows, the insurance market grows as well.

-Which products and services have the best perspectives in Estonia?

Life insurance has a great potential. People are beginning to think if the pension is enough when they get old. Useful for supporting children is to have education insurance, for instance. Should something happen with the parents, this form of life insurance at least helps the kids to get a good education. However, the developments of these as well as sickness insurance depends on how the state allows for use of private capital initiative by regulations and the tax policy.  

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ERGO Kindlustus:

Over 100,000 clients in Estonia

Member of the international ERGO Insurance operating in 30 countries

2015 1st half year profit in Baltics €5.22m, with €44m paid out in benefits