A strategic perspective

Better efficiency and synergies in the Group developed by arranging banking assets, optimizing and increasing efficiency within the PZU Group, and synergies between PZU and its subsidiaries (LINK4, PZU Health). Stronger operational agility by adjusting an operating model to focuse on customers and their needs.

Increased investment in the health market and digitization is a key element in the modernization of the health sector, responding to the growing social needs and technological challenges of today. In view of this, the PZU Group will spend PLN 1 billion on investments in health and achieve an increase in the number of mojePZU customers to 8 million thanks to the digitalization of the service model.

These are key directions for ensuring social and economic stability in the face of global challenges. The group aims to double its investment in green transformation and reach 15 million people covered with social responsibility activities each year.

Business growth prospects related to green financing, especially in the corporate segment. The opportunity is further bolstered by Poland’s high demand for energy transition, estimated to cost around EUR 300 billion by 2030, and funds from the National Reconstruction Plan (NRP).

Insurers are taking steps to implement modern technologies. About 75% of the institutions have already begun trying to implement them. Currently, the industry is most often investing in artificial intelligence and machine learning, which find applications in personalizing offers, optimizing decision-making processes and analyzing risk, among other things. An increase in the use of these technological solutions can contribute to better matching of offers.

Over the past two years, 80% of insurers have increased their investment in technological development. Insurance companies are consistently implementing modern digital solutions and tools. Technologies such as artificial intelligence, machine learning, automation, chatbots, and voicebots are supporting the sector in adapting to dynamic market conditions and growing client expectations. However, the potential for full use of these technologies may be limited, for example, by regulations on the use of artificial intelligence in the insurance industry.

The increase in the number of wealthy people in Poland has remained a noticeable trend for many years. Despite the increase in the tax threshold, the number of people with annual incomes of more than PLN 120 thousand continues to grow. In 2023, the number of taxpayers earning a gross income of more than PLN 120 thousand a year almost doubled.

The relatively low penetration of life and non-life insurance in Poland compared to Western European countries may indicate the potential for faster growth in this sector relative to GDP dynamics. Forecasts for the insurance market confirm this trend, predicting growth of 4-5 p.p. above the rate of GDP growth plus inflation.

Among the factors that will shape the PZU Group’s business in the long term, demographic trends are of particular importance, including the aging population, mortality, morbidity, especially for civilization diseases, and fertility rates. As the population shrinks and the proportion of elderly people increases, so does the need for health services, long-term care for seniors, and financial products tailored to the needs of an aging population. Population aging is a high probability phenomenon, but it is not a distinct factor that will significantly affect the development opportunities of the insurance market in Poland in the short term (until 2027). The health market in Poland is an area with great potential for growth. Until 2028, the growth rate of private health insurance will reach the average annual level of approx. 8.6% for supplementary health insurance and approx. 8.4% for subscriptions. In contrast, the market for services based on a fee-for-service model will grow at an average annual rate of 8.3%.

Over the past 40 years, the losses incurred in Poland as a result of climate change have been estimated at EUR 16 billion (about PLN 70 billion). Climate change is a major challenge for the insurance industry. More frequent floods, extreme droughts, and other climatic events are likely in the coming years, which could increase interest in property protection insurance. The estimated value of compensation paid by PZU for the September 2024 flood is about PLN 500 million.

The insurance market in Poland is shaped by numerous regulations that contribute to higher operating costs. An example is the introduction of IFRS 17, which changes the way insurance reserves are reported. While this change increases financial transparency, it also involves investments in IT systems and adjustments to operating procedures. The Solvency II Directive introduces capital requirements that could put additional pressure on insurance companies’ liquidity. The Polish Financial Supervision Authority (KNF) risk management recommendations may require the allocation of additional resources and the implementation of new processes, leading to increased operating costs. In addition, increasing requirements for ESG aspects and the introduction of the CSRD are obliging companies to invest more in the area of reporting on social and environmental responsibility activities. In addition, proconsumer regulations, such as the Retail Investment Strategy (RIS) for the distribution of investment products, will have a significant impact on the insurance sector. Under the new EU regulations, clients will be encouraged to buy the cheapest products, which will not always suit their needs. The regulations, including a ban on commission payments and a cap on costs in investment products, will make it more difficult for Polish insurers to offer savings and investment products. As a result, this may reduce the competitiveness of the Polish insurance market, especially in the area of investment products.

Global climate change and the rising cost of natural catastrophes are exerting a significant impact on the insurance market – both in terms of opportunities (as indicated in the section above) and risks, among other things, leading to increased reinsurance costs. The increased number and intensity of extreme events, such as floods and droughts, raise the risk for insurance companies, forcing them to take out more expensive reinsurance contracts. In 2024, global losses caused by natural disasters amounted to USD 320 billion, of which USD 140 billion were insured losses. In Europe, by contrast, only about 25% of losses from climate disasters are covered by insurance, indicating a significant gap in financial protection.

Increasing digitization, the development of the Internet and cloud technologies brought a new challenge to the insurance market in the form of cyber threats. Cyber risks are currently the fastest growing within the insurance gap, and available insurance products cover only a small portion of such risks. For example, ransomware poses a significant threat to companies in Poland – by 2024 alone, one in five companies experienced an attack, with 40% of them choosing to pay the ransom. Despite this, only 14% of companies were able to fully recover lost data. Security of data stored in the cloud is a growing challenge – as many as 82% of data breach incidents involved information stored in cloud environments.