The growth of the Internet market of insurance may exceed 500 billion rubles in 2024
Almost all sectors of the economy are focused on transformation and discuss the rapid growth of Internet trading. We decided to analyze the potential of Russian online insurance in the coming years.
Most experts and analytical agencies have made their forecasts until 2024. In September of this year, the KMPG report was published, according to which the insurance market in the Russian Federation will reach 2.3 trillion rubles for insurance premiums.
In our Internet market analysis we are more conservative based on the current situation of the regulatory framework, the average inflation rate, the current approach to risk assessment and the terms of insurers, and the average values of consumer demand. However, it is obvious significant changes in these indicators will lead to a change in the final market indicators.
The annual growth of the online market for the insurance of Russia (CAGR) 2019-2024 could reach 24%
According to analysts and experts of information and analytical resource Calmins.com, the Internet insurance market in Russia will most likely exceed 200 billion rubles in 2024. This will reach a market share of about 9.5% of the total volume (Total GWP) for classical insurance and life insurance. The forecast for the fees of the accrued insurance premiums in the Russian Federation 2024 is 2.15 trillion rubles, which seems more conservative, compared with the international company KPMG.
The Russian online insurance market looks quite interesting in comparison with the forecast growth of the European market. According to our evaluation, given a conservative scenario, the average annual growth (CAGR) of insurance premiums will be 24%, while in the EU this figure is about 8%.
The Chinese Internet Insurance Market has great potential to achieve an annual increase of 41% in 2019-2024.
A conservative view of this market will allow assessment of the real potential and minimal investment prospects if not everything goes according to an optimistic scenario. However, even CAGR at 24% is significant so that the Russian online insurance market is of interest to potential investors (Russian and foreign), as well as to current players (insurers, marketers and smaller agent companies).
Optimistic forecast for the development of the insurance online market in Russia by 2024
The share of the Internet market in developed countries in Europe in the total volume of insurance premiums already reached 30-40% in 2016. In Russian realities, in 2020, the share of the online market for insurance products was only 4.5%. At the end of the first half of 2021, a trend of an increase in the market has already been outlined. According to our assessment of Internet sales, insurance for the current year may exceed 100 billion rubles.
Our forecast is 9.5%. The share of online sales market, at 30-40% in developed countries, was already 5 years ago, it causes some dissonance. With the fact that Russian trends, including in insurance, are on average behind by 10 years, we can assume a 25% market share in 2024. And in this case, CAGR will already be 51% and will look more attractive even than the Chinese market (relative to growth).
Third party liability insurance – the basis of the Internet insurance market for the coming years
According to the results of 2020, the share of third-party liability insurance sold over the Internet from all online sales amounted to about 85%. It is predicted that this proportion of mandatory auto insurance will decrease, but to not less than 50-60%, due to the advanced growth in sales of voluntary types of insurance. However, the share of the third-party liability insurance may be higher than 60%, in the case of a sharper increase in the average contribution of the mandatory auto insurance due to an increase in the responsibility limits and the cost of crash repair of vehicles.
The main growth driver in insurance Internet trading is life insurance, at least fully comprehensive insurance, voluntary medical insurance and accident insurance and diseases.
The share of sales insurance on the Internet will grow
Even in 2021 we saw an explosive growth in life insurance for Sberbank Life insurance. According to our assessment, it is based on credit insurance through the platform of the Bank of Sber. However, this is just the “first swallow”. More involved in the players in this process is expected, especially insurers from banking structures. This will give an additional push to this area.
The second important point is online sales of classical accumulative insurance policies. To assess the possibility of significant development in this area, it is necessary to wait for new changes to the Direction of 5055-y, which are already being actively discussed at the level of the insurance community, the Bank of Russia, ministries and departments.
Risks to reduce market growth in life
We asked Vice President VCC Viktor Dubrovin to comment on what the new draft change in the direction of the 5055 bank of Russia, which “fully establishes all the parameters of the insurance product by voluntary (!) type of insurance. Naturally, uniform fixed parameters will only lead to the fact that for part of the population, this product will become unrecorded, for part it will be unavailable, and for insurers this means the lack of potential from the market.” That is, it is “it’s like to allowing you to sell a car of only one model, color, engine and set of options.” Also V. Dubrovin added that “this is contrary to the installation on the development of an internal investor and long money in the economy”. And we share the opinion of the expert and one of the leaders of the All-Russian Union of Insurers.
However, in our opinion, the unification of life insurance products in relation to the online market may conversely provide additional features. By themselves, the accumulative life insurance certificates are quite complex, and simplicity is important for sales on the Internet. Therefore, a possible minus as a whole for the market (unification) can be the drive to be a driver for online sales. However, it is obvious that the growth in sales of such products through an online channel will not be able to compensate for the decline in growth (hopefully not a fall) in the total market for life insurance market. It is possible that the Central Bank site – Moscow currency exchange (according to information from the market created on the basis of Inguru insurance aggregator) will be the main trust marketer for all sorts of insurance products ranging from the third-party liability insurance, fully comprehensive insurance, mortgage insurance, through to accumulative life insurance.
The growth of inflation and a fairly high key rate (with the potential for further growth for the next year or two) can also become negative factors for investing (accumulation) by the population of money in long tools (5 or more).
Expert assessments of the Russian insurance market 2024 (Total GWP)
According to analysts and experts of information and analytical resource Calmins.com, the insurance market in Russia will reach 2.15 trillion rubles in 2024. It is slightly lower than the forecast of the international KPMG company (enters the “big four” consultant auditors), and many market players (including insurance) are based on their experts and analysts. In September 2021, the KMPG report was published. According to forecasts, the insurance market in 2024 could reach 2.32 trillion rubles of the insurance premium.
The Russian rating agency Expert RA according to the “Vedomosti” publication believes that the insurance market in the Russian Federation will develop even more aggressively and in 2023 may even exceed 2 trillion rubles. Thus, in 2024, it may exceed 2.3 billion rubles to evaluate KPMG.
The Russian online insurance market has great potential for significant growth and development. The main segment will obviously be auto insurance, and the second largest life insurance (including credit). A rapid growth or a decrease in classical accumulative life insurance will depend on the regulatory framework, which we discussed above.
The primary driving force of online sales was third-party liability insurance and online insurance aggregators. However, taking into account the large investment opportunities in the insurers themselves, they will be aggressive to enter the market. Many insurance companies have already revised their IT budgets towards an increase (on average double), and also planned online transformation in development strategies for the next 3-5 years.
Against the background of the coronavirus pandemic, insurers have become more actively transforming their sales and transferred them to the online environment. The great potential in insurance for life, for sales of online policies by insurers of banking groups, such as AlfaInsurance, Rosbank, Sovcombank, Moscow Credit Bank, etc. (this is seen by the example of the “explosive” growth of Sberbank of life insurance according to the Central Bank of the Russian Federation in the first half of 2021).
Potentially, the market could grow to 500 billion rubles in 2024, if we catch up with our European colleagues (with a share of online sales of 25%).
However, it is worth noting that credit insurance and mortgage insurance (and some others like fully comprehensive insurance) are banking products, and this is not a very “clean” market online insurance. Also, they are not always correctly reflected in the reporting fees for sales of insurance, which are carried out via the Internet (we previously talked about this on the example of the Mafin company and reflect their charges in the statements of the IC “Absolute Insurance”).
It is not worth it to expect a large change in market players and the impact of this factor on the development of the online insurance market in connection with the introduction of new requirements for financial sustainability and solvency for Russian insurers (provision No. 710-P). According to the “Interfax” edition, this will not affect the collection of the industry as a whole. The VCC stressed that insurance companies that have licenses for life insurance, have already prepared for the new requirements.
The article is approved by an expert of the insurance market by Denis Lebedev