A brief analysis of the results of 2020 according to the Bank of Russia from Doctor of Economics, Ph.D., Professor Alexei Zubets

Despite the decline in economic activity caused by a pandemic, the Russian insurance market increased in 2020. The main contribution to growth in the year of the year was made by cumulative life insurance and loan insurance, support for which provided the launch of preferential mortgage lending programs.

Content:

1. Russian insurance market for 2020 – fast facts
2. Life insurance in Russia
3. Insurance against accident and diseases
4. Voluntary medical insurance market
5. Comprehensive and collision car insurance and vehicle insurance
6. Insurance market for mandatory third party insurance coverage
7. Property insurance for the legal entities
8. Property insurance for the Individuals
9. Other types of insurance
10. Unprofitability and expenses of the Russian insurance market 2020
11. Brokers in the Russian Insurance market 2020
12. Online and online-sales in 2020

Russian insurance market for 2020 – fast facts

Insurance premiums in 2020 increased by 4,1% (0% in 2019). In the Voluntary Medical Insurance Market (DMS The amount of insurance premiums exceeded 1.5 trillion rubles. (1.45% of GDP). The dynamics within the year was uneven due to the strong volatility of macroeconomic indicators. In the second quarter of 2020, when the strongest restrictive measures were operating due to the deterioration of the epidemic situation, there was a temporary decline in the volume of the collected awards. However, in the third quarter, as restrictive measures were removed, the growth almost returned to the level of the first quarter, slowing down a little in the fourth quarter.

At the end of 2020, payments under insurance contracts increased by 8.1%, to 659.3 billion rubles. The minimum of payments was fixed in the second quarter: its volume was then decreased by 6% (to the same period of 2019) due to the decline in activity in all major areas of activity, reducing the number of road trips, which contributed to the reduction in the number The main contribution to the growth of payments in 2020 was an increase in payments of the completed investment insurance policies (ISP). The increase of payments also supported the weakening of the ruble, which provoked an increase in the average payment in certain segments of the insurance market, where the dependence on the course dynamics (primarily in the auto insurance due to rising prices for components).

During 2020, the profit of the Russian insurance market increased slightly and amounted to 247.5 billion rubles. Profit growth was associated with an increase in investment income (due to the revaluation of currency assets). At the same time, the results from insurance activities decreased.

Pandemic 2020 – not the only drawback

Despite the fact that 2020 turned out to be difficult for the economy, including the insurance market, it is possible to note some positive effects of economic shock for the medium-term development of the industry. In particular, we are talking about accelerating the digitalization of the market. In addition to the development of online sales (including with the expansion of the possibility of survey of property using mobile applications), the remote losses adjustment and telemedicine services is also expected. It is possible to increase the popularity of insurance products that imply payment of insurance protection in proportion to the time of its use or for a certain period (month, quarter, property insurance at the time of vacation, etc.). This can increase the individualization of tariffs and attract new customers to the insurance market.

Life insurance in Russia – results of 2020

In 2020, life insurance has changed to growth after falling in 2019. The Life insurance market grew by 5.2%. Life insurance growth was mainly due to the growth of accumulative life insurance. The volume of contributions to universal life insurance increased by 25%, to 136.9 billion rubles. Fees on investment insurance of life, on the contrary, decreased by 7.4% to 182.9 billion rubles.

Thus, in 2020, the life insurance market returned to growth after decreasing fees a year earlier. Among the main reasons for the change of trend – the active promotion of products for accumulative insurance of accumulative life insurance products amicably against the background of reducing deposit rates and searching for alternative and potentially more profitable investment instruments by the population. The active promotion of accumulative life insurance helped to compensate for the decline in the investment life-insurance segment. At the same time, individual insurers reoriented to the sale of accumulative life insurance programs, which in their characteristics do not differ practically from the programs of  investment life-insurance. Thus, a significant part of accumulative life insurance treaties fell on the polls with one-time contributions and the duration from 3 to 10 years.

The reduction in the segment of investment life-insurance may continue due to the fact that at the beginning of 2021 the regulator recommended not to sell to customers without special knowledge of individual comprehensive products for understanding the products of the investment life-insurance and accumulative life insurance. Life insurers are obliged to disclose detailed information about life insurance products to customers, for example, indicate a list of assets, from the cost (cost dynamics) of which the amount of income of the beneficiary, the procedure for calculating and paying guaranteed and investment income e.t.c.

As a result of this, the volume of subsidiaries on National Assembly increased by 25%, to 136.9 billion rubles, and the value of the contributions on the FSH decreased by 7.4%, to 182.9 billion rubles.

To a certain extent, the decline in interest in investment life-insurance is explained by the low-incurred profitability of completed contracts, which in general did not averave the amount of bets on deposits and in some cases was lower than inflation. Thus, according to the Bank of Russia, the average yield on the three-year-old insurance certificates for investment life insurance, ended in 2020, amounted to 4.7%, which is lower than the average return on deposits concluded in 2017 for a period of from 1 to 3 years (7%). The average yield on five-year certificates, ended in 2020, was even lower than – 3.1%. At the same time, weighted average rates on bank deposits of individuals concluded in 2015 for more than 3 years amounted to 8.1%.

“As a result of this, the volume of contributions to accumulative life insurance increased by 25%, up to 136.9 billion rubles, and the value of fees on the investment life-insurance declined by 7.4%, up to 182.9 billion rubles.”

The long-term life insurance driver is also its active promotion by banks, which is explained by their desire to diversify sources of income against the background of revenue reduction in low interest rates. Banks are actively offering their customers to purchase integrated contributions to deposits in the package with insurance products. On the other hand, this practice causes conflicts with customers. According to the Bank of Russia, almost three-quarters of complaints received from the Bank of Russia on the subject of Misseling in 2020, accounted for issues of sales of investment life-insurance and accumulative life insurance products. Complaints are involved in the introduction of consumers to delusions about the characteristics of such products.

In 2020, the growth of total insurance payments for life insurance continued – by 48.5%, up to 158.3 billion rubles. Almost all increases provided insurance payments on investment life-insurance, which is associated with the massive completion of insurance contracts concluded earlier. As the execution of the certificated, which opened during the boom of the market, the investment life-insurance, the volume of payments in this segment will decrease.

Another important reason for the restoration of the life insurance market was the revival of demand for loans from the population, which caused an increase in demand for the life insurance of borrowers. The increase in lending to individuals in 2020 continued, despite the decline in income of the population. This was facilitated by the launch of a preferential mortgage program under 6.5% (as a whole, the amount of loans provided for 2020 increased by 10.9% to the same period of 2019, mortgage loans – by 50.8%, and the same period a year earlier). According to the results of 2020, the volume of contributions for the insurance of the life of borrowers amounted to 94.5 billion rubles.

Insurance against accident and diseases – results for the 12 months of 2020

In Russia, a positive impact on the size of the insurance market for accidents and diseases was the emergence of certificates covering the risks associated with the coronavirus desease and its consequences. Such certificates were acquired by both some employers for their employees and citizens independently. Certificates of coronavirus disease aboard an aircraft or on a trip that airlines offer to purchase their customers with tickets or at check-in also appeared .

Results for the Voluntary Medical Insurance Market in Russia

On the other hand, due the decline in economic activity and income of the population and companies, the most negative impact among the key segments of the Russian insurance market were felt by the Voluntary Medical Insurance market.

After rapid growth in 2019 (by 19%), at the end of the previous year, the size of the total insurance premiums decreased by 2%, to 177.1 billion rubles. First of all, it was caused by a decrease in demand for medical insurance programs by individuals and legal entities in connection with the economic crisis. A reduction in the medical insurance segment of labor migrants, the number of which has decreased in Russia, and almost complete collapse of the insurance segment of traveling abroad due to the closure of the borders was also reduced.

The amount of Voluntary Medical Insurance agreements concluded with individuals in 2020 decreased by 42.6%, the reduction in the corporate segment was 7.7%.

Payments under Voluntary Medical Insurance agreements in 2020 decreased by 6.3%, to 118.6 billion rubles. Reducing payments, despite the increase in the number of settlement losses, it happened due to the decline in the average insurance payment to 2.6 thousand rubles. At the same time, at the expense of wealthy Russians who retained Voluntary Medical Insurance policies, as well as large corporate insurers, in 2020, the average insurance premium on Voluntary Medical Insurance increased by more than 50%, to 16.5 thousand rubles, in the segment of legal entities

Results of 2020 on comprehensive and collision car insurance and Transport Insurance in Russia

The volume of insurance of comprehensive and collision car insurance in 2020 increased due to the growth in the number of concluded contracts. This was facilitated by a decrease in the cost of auto insurance as the franchise distributed and the implementation of the discount system by insurers against the background of decline in accidents. On the other hand, an increase in the cost of repairing foreign cars, after the weakening of the ruble, as well as a change in the cost of spare parts in the third party liability insurance Directory led to an increase in average payments for auto insurance.

The increase of contribution amounts in insurance of land vehicles amounted to 3.1% in 2020. At the same time, the negative results of April-June 2020 had a negative effect on the dynamics of the market – the period of a slash in sales of new cars (-44% y / y) and issued by car loans (-42.4% y / y). In general, in 2020, the number of sales of new cars in Russia decreased by 9.1%, and the number of auto loan issued decreased by 5.9%. At the same time, in 2020, the number of concluded contracts increased higher rates than contributions. The greatest increase in the number of contracts occurred in the third quarter against the background of a surge of car loans and the implementation of deferred demand after the restrictive measures that operated in the second quarter.

Significant market support has a continued decline in auto insurance, which is due to the growth of franchises and truncated risks programs. In addition, in 2020, insurers offered low-cost customers to use flexible discount systems. All these measures have stimulated the renewal of contracts, which allowed the market to grow, despite the decline in the number of sales of new cars. The average insurance premium in 2020 decreased to 33.5 thousand rubles. (-1.6 thousand rubles per year), the minimum value was observed during the year in April-June (26.5 thousand rubles). By the end of the year, the average insurance premium for comprehensive and collision car insurance increased dramatically. This point to the fact of increasing the share of contracts for credit vehicles, truncated programs for which, as a rule, are not issued the growth of the cost of vehicles in connection with the weakening of the ruble, and termination of insurers discount programs that were operating during the self-isolation period.

The growth rates of land transport insurance payments in 2020 decreased sharply (up to 0.8% from 16.7% in 2019) by reducing payments in the results of the second quarter of 2020. Such a dynamic is due to a decrease in the number of accidents during the period of the restrictive measures and self-isolation regime, when the number of motorists on the roads was minimal. At the same time, despite the decline in the number of insurance claims, the volume of payments has not declined. This is due to an increase in the average insurance payment to 108.6 thousand rubles. (+7.6 thousand rubles per year). The impact on the growth of average payments was to increase the cost of auto parts for imported cars due to the weakening of the ruble

The situation in the insurance market for mandatory third party insurance coverage 2020 is an increase of 3%

The situation in the mandatory third party insurance coverage market in 2020 was quite stable. The growth rates of contributions amounted to 3.0% (-5.3% in 2019), the total amount of the collected awards – 220.3 billion rubles. The market also supported the increase in the number of concluded contracts. The average insurance premium in 2020 (5.5 thousand rubles) generally slightly exceeded the rate of 2019.

According to the results of 2020, the average payment for mandatory third party insurance coverage increased by 6.7%, which is also associated with an increase in the cost of repairing foreign cars and changing the cost of spare parts. Despite the noticeable increase in average payments, total payments under the mandatory third party insurance coverage agreements decreased (2.5%, to 137.6 billion rubles). This was associated with a decrease in the number of regulated insurance cases against the background of reducing the number of accidents on the roads due to the action of restrictive measures.

In 2020, the number of complaints received by the Bank of Russia in connection with mandatory third party insurance coverage decreased by 24.2% compared with 2019. At the same time, the complaints about this segment still constitute the main volume of complaints of insurers. The volume of complaints on the incorrect use of the Bonus-Malus coefficient, which, however, make up more than half of the treatments on the subject of mandatory third party insurance coverage.

Insurance of property of legal entities

GDP reduction in 2020 did not have a significant impact on the insurance segment of other property of legal entities. Cumulative insurance premiums reached 114 billion rubles. Despite the slowdown, the growth in the year turned out to be the maximum among the main segments of the insurance market without taking into account life insurance.

Other property insurance markets (so-called “fire” insurance) supporting contracts: the average insurance premium for the year increased by 18.5%, and the number of prisoners has decreased by 6.9%. The market support in the future will also return to the estimated cost-effective objects of insurance costs that were excluded from it in 2014. This change will contribute to the restoration of the construction and installation sector in the insurance market.

Insurance of individuals’ property in 2020 showed a slight decline

The growth of contributions to the insurance of other property of individuals (+ 10.9% in 2019) was replaced by its stabilization in 2020 (-0.3%). In 2021, the negative impact on the volume of contributions in this form of insurance will be rebuilt with the implementation of the Moscow Housing Insurance Program, according to which about half of the capital’s apartments are insured.

The popularity of the program was related to the fact that the Moscow government co-financed the payment of losses when an insured event occureds (from 5 to 15%, depending on the selected value of residential premises), as well as with the convenience of its conclusion – the insurance premium could be made, among other things, according to payment documents for paying for housing and communal services.

Other types of insurance in 2020

The volume of financial risk insurance continued to fall as was mentioned during the previous year, and decreased by a further 9%. This, among other things, was due to a sharp reduction in tourist trips abroad and the resulting drop in the market of insurance of travelling abroad (such policies include among other things protection against financial losses). The volume of cargo insurance decreased by 8% in 2020 (+ 5.3% a year earlier) following the decrease in cargo turnover.

Unprofitability and expenses in the Russian insurance market 2020

The unprofitability and costs of the insurance market of Russia in 2020 and loss of Russian insurers in 2020 remained stable. The combined loss rate for the year virtually did not change and amounted to 90%. In this case, the structure of the indicator has changed. The loss rate fell by 1 pp, to 48%, due to the higher rates of increasing insurance premiums compared with the growth rates of the increasing losses. This, included the reduction of unprofitability during the self-isolation.

The cost rate, on the contrary, increased by a comparable amount – up to 43%. This is the maximum annual value for the entire observation period.

Brokers in the Russian insurance market in 2020

The remuneration of insurance mediators (brokers) constitutes more than half of the total value of the costs (expenses for conducting business, general and administrative expenses) of Russian insurers.

In general, in the market is the magnitude of the commission of intermediaries from contributions received by their participation in 2020. amounted to 30% (+0.5 pp per year). The largest volume of the Commission falls on credit insurance – insurance against accidents and diseases (the bulk of the premiums in this form of insurance fall on the insurance of borrowers) and the life insurance of borrowers. For a total, these two types of insurance provide a little more than half of the total amount of rewards of intermediaries. Another quarter of the commission accounts for motor owners damage and the insurance of other property of individuals.

The share of commission for credit insurance exceeds 50% of contributions received with the participation of brokers (66% in insurance against accidents and diseases and 60% in the insurance of the life of borrowers), for other impact of property insurance of individuals is 49%, motor own damage insurance – 29%.

At the same time, brokers remain the main channel for sales of insurance products: the share of insurance premiums obtained by their participation, in 2020 was three-quarters of the aggregate magnitude of the premium. Of this, more than half of the contributions fall on credit organizations – about a third of the collected contributions are obtained as a commission. High commissions intermediaries allow insurers to increase contributions in profitable types of insurance.

Thus, the combined factor of lossless insurance against accidents and diseases in 2020 amounted to 72.2%, the loss rate (excluding expenditures for the conduct of the case) was equal to 23.3%; comprehensive and collision car insurance – 81.8 and 46.0%, respectively. For Online and Internet sales in 2020, the share of premiums received by insurers through the Internet remained stable (5%).

Online and online-sales in 2020

The main volume of contributions received by insurers online is accounted for by third-party liability insurance At the same time, the share of third party liability insurance contributions received via the Internet did not exceed 30%, even during the period of self-insulation, which operated in 2020.

Prepared and approved by expert of the insurance market, Doctor of Economics, Ph.D., Professor Zubets A.N.

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