Insurance market in Russia in 2021 is bound to increase

Perspectives of the Russian insurance market – an interview with the President of the WCI and Russian Association of Motor Insurers, Igor Yurgens.



Igor Yuryevich Yurgens, President of the Russian Association of Motor Insurers told what awaits insurance today and tomorrow, for information-analytical source – deliberate insurance exclusively.

– Good afternoon, Igor Yuryevich. We thank you for the opportunity to tell our readers, so to speak, first-hand, about the situation that developed in the Russian insurance market last year. So, let’s start with the first question. How do you rate the results of 2020?

– In our opinion, the pandemic 2020-year insurance market has resisted very well. The dues subsided during the first half of the year. However, by the end of the year we recorded even a small increase.

The financial results of the industry were also at a good level. All this is largely as a result of an effective, professional and timely reaction by the regulator to the situation, as well as smoothly rebuilt cases of insurers who were able to quickly make changes to their business processes.

It became obvious even the strongest critics of the insurance market that insurance products are really in demand by the population, and during the crisis, the demand for them did not fall. In addition, in 2020, the insurance industry has become one of the largest investors in public debt and government bonds.

– Igor Yuryevich, what are your forecasts for 2021?

– According to our estimates, in 2021, the uniform development of the market will continue, based on the structure of the insurance portfolio of the last three years. The segments of life insurance and health, as well as motor insurance will remain among the leaders in the field of dues.

In the current year, we see the prospect of further regulation of cumulative and investment insurance programs, which will most likely cool this segment. However, if a legislative initiative to incorporate these financial products in the system of state guarantee is promoted, then additional consumer trust will gain impetus and, as a result, restore sustainable growth of dues.

In connection with the extension of the Mortgage Lending Master Support Program and high indicators in range of issuing loans to the population, the positive dynamics of credit insurance fees (universal life insurance and the Life Insurance of the Borrower) will continue.

The restrictive measures and the preservation of an unstable economic situation will continue to put pressure on the VHI market, especially in terms of insurance of foreign travel insurance, labor migrants and corporate insurance of small and medium-sized businesses.

Voluntary transportation insurance (comprehensive and collision car insurance) in 2021, most likely, will remain in the range of the previous two years, and third party liability insurance dues may increase by the level of annual inflation. The expected increase in total dues can be from 5 to 10%.

– If possible, tell us and our readers, what is the forecast for profits on the insurance segment for 2020?

– The total combined profit of insurers will exceed the indicators of the previous year, due in part to the reduction of the loss of some segments that occurred as a result of the decline in business activity and the restrictive measures introduced. But it is worth noting that the additional capital received by many insurers will be aimed at ensuring financial sustainability in the framework of the execution of new requirements of the Central Bank, which are due to come into force on July 1, 2021. For many insurers, especially small, it may become a very big problem. In addition, there are almost simultaneously reinforcing IFRS, which in a new way determine the calculation of one of the reserves. This will significantly increase the size of the liabilities that have to be covered by an admissible asset regulator, which, in turn, will lead to additional difficulties in compliance with the new requirements for solvency and even major insurance companies can already be touched by this. Therefore, we hope for a delay in the enforcement of the new requirements for solvency until July 1, 2023, when the contribution of new requirements for the calculation of reserves is already leveled.

– And what, in your opinion, are the key problems of the insurance market for 2021, the main topics for promotion, and which protection bills to await?

– The key task of 2021 for the industry is to preserve the role of the insurance community in the further institutional infrastructure development of the insurance market. The trends marked at the end of 2020 to reduce the role of insurers in solving the most important social problems of the state carry risks of continuing the growth of concentration of state functions in the national insurance system in the conditions of a declared market economy.

The market has a lot of work to achieve a compromise in terms of conservation of industry-automated infrastructure and attempts to artificially change the spent business processes on socially significant types of insurance.

We will closely follow how the compulsory health insurance reform passes, which will lead to a reduction in the zone of the competencies of insurance medical organizations, and whether the goals of increasing the availability and quality of medical care will be achieved.

The question of comprehensive improvement of the financial security system of tour operators and the increase in the transparency of the tourist industry market is still an acute issue.

Well, of course, to create the conditions for sustainable market development, it is important for us to promote the implementation of strategic tasks, including in the development of regional home insurance programs and development of incentives in the field of life insurance.

– Igor Yuryevich, the competitive struggle on the market continues, its narrowing is observed, what is in store for insurers and customers from 2021? Is bankruptcy of insurers possible in the current year?

– The insurance market has been in the state of regulatory reforms for years and in 2021 we will have to go to new requirements for ensuring financial stability, which will undoubtedly have pressure on the capital of insurers.

The insurance community is in dense labor contact with the Bank of Russia on this issue. So, we will continue to substantiate our position on a number of controversial, in our opinion, requirements that exclude a number of obvious liquid assets from covering their own funds and Do not forget about the further stages of increasing the minimum amount of share capital from January 1, 2022.

Therefore, the likelihood of further reduction in the number of companies exists, but we hope that this process will not be massive.

As for the development of competition, in many segments it is a market rivalry that pushes the market to technological and product development. We assume that this trend will continue in 2021.
It is true, there are segments where the development of a competitive environment should be paid. In particular, it requires additional understanding the bank insurance situation, as evidenced by last year’s initiatives of the Bank of Russia on reformatting mortgage insurance with the scenario of the interdict of insurers from direct interaction with the client. We see the way to solve this task in increasing the transparency of the market, ensuring equal access of insurers to work with borrowers and standardization of insurance products, which ultimately will increase the level of competition and have a positive impact on market pricing

– Recently, various changes in the third-party liability insurance are much discussed. Do you consider discussion of preparation for the next stage of the liberalization of tariffs in mandatory auto insurance is timely?

– Yes, we believe that time has come to start discussing the following steps. This is not a fast process, since changes to the law into the sub-commercial acts are required. So, if we start discussing further steps on the transition to the freest tariffs, this does not mean that everything will already be “tomorrow”. The process will be long enough, and it is necessary to begin in advance.

– Most recently, information was released that it is planned to unite the third-party liability insurance in the framework of the Allied State of Russia and the Republic of Belarus. How do you assess this opportunity for the State, the entire market, insurers and customers? Will it affect the finances of car owners?

– Of course, the formation of a unified system of third party liability insurance is an important strategic task within the framework of the integration processes of the Common State. However, it requires a complete unification of the Russian and Belarusian civil and insurance legislation for its creation, and now the task of such a unified system of third-party liability insurance is fully solved by “Green Card” certificates. Russian insurers give out about 500 thousand “green cards” per year to travel to the Republic of Belarus, which is less than 1% of the third party liability insurance certificates annually. Thus, the inclusion in the Russian certificate third party liability insurance of the Creating Coverage in the Republic of Belarus means that all other car owners (who do not have property interests in such insurance) will cover the risks of a small number of car owners. That is, it will lead to increase of the tariffs for all car owners. At the same time, the difference in legislation – both civil and insurance – in Russia and in the Republic of Belarus is very significant, the process of unification will take quite a long time.

– How do you assess the results of third-party liability insurance for 2020, and how are the auto-insurers for the passage of 2021: fears and hopes?

– 2020 was very difficult and very unusual: at the beginning of the year there were shocks related to a pandemic when insurers, like representatives of all other industries, had to be rebuilt on the remote mode overnight. With this challenge, the community has coped, the work did not cease, the quality of services did not fall.

In the middle of the year there was a transition to more personalized tariff formation, this is a significant shift for the industry. The Bank of Russia at the same time expanded the tariff corridor. Insurers were able to differentiate drivers depending on the most diverse factors, first of all, of course, we are talking about how much the driver takes care. Insurers have great experience in assessing customers on voluntary types of auto insurance, so they already understand certain trends.

As an example: as a rule, a family adult driver who has children, drives carefully, has less accidents than a young man who has no family and children. Based on this knowledge, the insurer can give a different tariff for these two categories of drivers. And there is no injustice in it, everyone should pay for themself, and not for others.

The Bank of Russia has banned the use of certain factors (for example, religion, nationality, political beliefs, official position, etc.), but the rest of the insurers were free to determine the tariff, which was not previously possible. It should be noted that the average premium size remained at about the same level that it was before. This is a convincing answer to sceptics who urged society that the insurers will take advantage of the situation and will certainly raise the cost of the policy.

In 2020, the introduction of a new information system was commissioned – AIS third-party liability insurance 2.0. The old version was developed many years ago and was intended for a certain circle of tasks. But the development of the industry dictates new needs, so the insurers created a new system that allows not just to store data and issue the insurance history, but also to accept new complex tasks, process data faster, interact with information systems of other bodies and organizations successfully.

In 2021, we hope, that not only does the dialogue continue on the further individualization of tariffs for the third-party liability insurance, but also to receive the development of a trend on remote loss settlement. Now, you can already remotely declare the insurance case and transfer photos from the scene of an accident, but in the future, it should be such that in electronic form you can even submit an application and receive the directions for repairs.

The State Duma has a bill on the electronic settlement of losses for third-party liability insurance, while the Russian Association of Motor Insurers, for its part, is also concerned about this topic and is already considering the relevant business processes and possible technical solutions.

– Indeed, 2020 was the year of full-scale transformation. Moreover, what are the tasks of digitalization now? What results in negotiations with the Central Bank about the fate of information bases would you like to see achieved?

– Now, the insurance market in terms of digitalization is one of the most advanced in Russia. The new system of AIS third-party liability insurance 2.0, commissioned last summer, brought the possibility of insurers to work with clients when concluding contracts for a new level. Systems and work on other types of insurance will be developed at its base.

Now the next important step is to provide insurers a convenient service for online settlement. We see that car owners actively use applications «accident Europrotoсol» and «Assistant OSAGO (third party liability insurance). The SDK module, which is prepared by the Russian Association of Motor Insurers will allow insurers to use the functionality of the Assistant OSAGO (third party liability insurance) in their mobile applications.

– Igor Yuryevich, please tell us, what is supposed to be done this year in preparation for the creation of a system for guaranteeing the life insurance market? How do insurers participate in the discussion, are there any controversial moments? Do you expect the All-Russian Insurance Association to reduce in fees in the life insurance segment in 2021 against the backdrop of all the changes in the Bank of Russia?

– At the end of last year, the Bank of Russia sent a bill on the system of guarantee in the life insurance market to discuss with the All-Russian Insurance Association. From the part of the All-Russian Insurance Association, a positive assessment of this project was given. The next step we expect from the Bank of Russia is to make a project of a broad discussion and introduction to the State Duma. There are no significant controversial moments and disagreements.

Life insurance fees in 2021 will remain at the level of 2020, the factors affecting the decline in fees and increase the fees are rather balanced.

– We all spoke about the classic insurance market and in which direction the All-Russian Insurance Association plans to promote participation in the reform of compulsory health insurance, what is the role of insurers in the reform of the primary head of medical institutions in the Russian Federation (budget investments for 5 years have been identified in 550 billion rubles), and what will change for insurers in compulsory and voluntary health insurance?

– It is still difficult to assert unequivocally which design will work. Recently, changes were made to the compulsory health insurance law, the base of subtitle acts is being updated, which determines the peculiarities of all participants in the compulsory health insurance system. In addition, other amendments to the compulsory health insurance law are expected, which are now undergoing interdepartmental discussion. They are again discussing the merger of the Federal Compulsory Medical Insurance Fund (FOMS), Social Insurance Fund (FSS) and Pension Fund, and this will result in the creation of a new compulsory health insurance market regulator.

Currently, it is clear that the main trend of the changes that the insurance community is fully committed to is the support and protection of citizens insured by compulsory health insurance, and in any region of our country by their insurance companies.

We expect that the insurer in the new design will still remain a reliable support, a source of information and protect their rights and interests in obtaining high-quality medical care, including the introduction of the latest digital technologies. The corresponding dialogue is currently carried out by working regulations between the representatives of the All-Russian Insurance Association, the Ministry of Health and the FOMS.

– An important question remains, which is of interest to the Russian insurance market – will branches of foreign insurers arrive in 2021? As far as is known, such an opportunity should appear from July 1, 2021. Please tell us more detail about this.

– The share of foreign participants in the aggregate authorized capital of insurers according to the latest data of the Central Bank is about 10% and every year slowly decreases. According to our preliminary estimates, the great interest of foreign participants in opening of their branches for the implementation of insurance activities in the Russian territory is currently not observed.
The insurance community participated in the discussion of legislation which will regulate the process of admission of foreign branches to the Russian insurance market. We, in general, support the draft law prepared by the Ministry of Finance, which ensures the necessary balance between protectionist measures to protect the national insurance market and the creation of fair competition between foreign and Russian insurers. Foreign insurers are considered as independent subjects of insurance business on a par with Russian companies. They establish certain licensing requirements, ensuring financial sustainability, as well as the guarantee deposit of the branch. The activities of a foreign insurance organization are planned to limit voluntary types of insurance, reinsurance, as well as the third party liability insurance.

On behalf of the editorial board and readers, we thank Igor Yurevich for an interesting and informative conversation and wish their market to grow, develop and provide customers with useful and in demand services and products.

Neo-correspondent LS

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