The Quality of Life Insurance Sales is Low

Slovak clients are more satisfied with the quality of life insurance sales than Czech clients; however, they are willing to pay less for it. Advisors’ commissions are as much as 20 times higher than the clients are willing to pay.

Bratislava, 30 September 2014 – The quality of life insurance sales in Slovakia is still relatively low. Advisors’ commissions for concluding life insurance are as much as 20 times higher than the clients themselves are willing to pay based on the value they see in the advisory provided.


This finding comes from a survey conducted by Deloitte in cooperation with the agency STEM/MARK in May this year from a sample of 1,037 respondents. The survey in the Czech Republic, which took place in April from a sample of 1,066 respondents, had a similar outcome.  Slovak clients are more satisfied with the quality of sales; however, the Czechs are willing to pay as much as double the commission that the Slovaks pay for the advisory.

The main problems for the Slovak life insurance market include short lifetime of new contracts and the related switching of insurance to other insurance companies due to commission gained by financial advisors. Excessively complex products with unclear fees and life insurance policies that do not match clients’ needs are another alarming problem.

Life insurance is an important tool for financial security for the family. However, it is still underestimated in Slovakia. According to statistics, Slovaks pay, on average, about five times less than Germans or Austrians for life insurance. Therefore, life insurance has great growth potential in Slovakia, if it is not undermined by the above problems regarding the quality of sales. They are closely related to the prevailing business model for the distribution of life insurance.


“Clients rarely buy and choose life insurance on their own; a financial advisor usually sells it to them. The insurance companies compete with the amount of commission and life insurance parameters among the distributors, not the end customers. Non-transparent practices such as initial life insurance units or expensive special additional insurance help insurance companies cover the costs of distribution, but they have no benefit for the end customer,” explains Karel Veselý, Deloitte’s Director for Insurance Advisory Services.


The main conclusions of the survey on life insurance in Slovakia:

•          The objectivity/impartiality of the offer – from the perspective of the objectivity of the offered solution, the views on the services provided by independent financial advisors were polarised (35% of the respondents were very satisfied, which was the best result from the business channels; on the other hand, 25% were dissatisfied or very dissatisfied, which was the worst result). Regarding the representatives of insurance companies and bank advisors, the majority of the clients were satisfied (52%, or 49%).

•          Taking into account the client’s needs – One of the principal results of the study was that taking into account the client’s needs plays a significant role in whether the client decides to conclude life insurance or not. 50% of respondents who have not concluded life insurance said that their actual needs were not taken into account. Conversely, 96% of clients who concluded life insurance declare that the concluded insurance meets their needs.

•          Commission for advisory services – Life insurance clients are willing to pay an average of EUR 12 for advisory services when concluding life insurance policies. Merely 13% of such clients would pay more than EUR 20. Clients who were offered life insurance without success would pay an average of just EUR 6.

•          Clarity of the offer – A full 91% of the respondents indicated that the explanation of life insurance terms and conditions was absolutely or rather clear.

•          Life insurance intermediary – Life insurance was most frequently offered to the respondents by an insurance company representative (57%) and, in other cases, usually by an independent financial advisor (24%) or a bank employee (19%). The percentage of concluded insurance policies is slightly higher for insurance company representatives and, on the contrary, slightly lower for bank employees.

•          Profile of life insurance clients – 66% of the respondents have been offered life insurance; however, merely 37% have, in fact, concluded life insurance policies. Such respondents are usually persons with completed secondary school studies (42% of such respondents have concluded life insurance policies) and university graduates (59%). Life insurance policies are most frequently concluded by persons aged 30 – 44 (54% of the respondents).

•          Comparison of urban and rural areas – The share of the respondents with concluded life insurance policies does not vary according to municipality size. However, there is a significant difference in commercial channels that offer insurance. In smaller municipalities, life insurance is mostly offered by insurance company representatives (62% of respondents in municipalities with up to 5,000 inhabitants and 66% in municipalities with up to 20,000 inhabitants). In larger municipalities, all three channels are more equal (in municipalities with more than 100,000 inhabitants, life insurance was offered by an insurance company representative in 38% of all cases).

•          Comparison of Slovakia and the Czech Republic – When comparing the Slovak and Czech markets, Slovak clients are more satisfied with the services offered (eg 79% of Slovaks and just 64% of Czechs were satisfied that their needs were taken into account; 79% of Slovaks and just 66% of Czechs were satisfied with their advisor’s impartiality). However, Slovaks are willing to pay just half the amount that Czechs would pay for advisory services (Slovaks and Czechs who finally concluded life insurance policies were willing to pay an average of EUR 12 and EUR 24, respectively).



“The survey has revealed a large inconsistency between the amounts that clients would be willing to pay their financial advisors and the amounts that are common on the market as commission. In long-term life insurance policies, the actual commission is as much as 20 times higher than the average amount that Slovak or Czech customers would be willing to pay,” said Peter Wright, Deloitte Partner leading a team that provides services to the insurance industry in Europe.


“Our experience from abroad - eg the UK, Netherlands or Germany - indicates that the current model of life insurance sales in Slovakia will have to undergo changes. Although clients on the Slovak and Czech life insurance markets have so far declared their satisfaction and have not exerted sufficient pressure on insurance companies, the ever-growing regulation and more demanding clients will inevitably bring changes to these markets,” he added.


“It is positive that some insurance companies and advisory networks understand the need to increase the quality level on the market. Such insurance companies, for example, abandon the initial investment life insurance units or stop cooperating with dubious networks. Some intermediaries, for instance, adopt the spreading of commission payments over time to decrease the one-sided motivation for a short-term volume of a new transaction or agree on the same commission level with various insurance companies to move towards real independence,” stated Karel Veselý.






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© 2014 Deloitte Slovakia 

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