Top 10 main events of Russian Insurance Market – expert opinion

What was special about Russian Insurance Market in 2021?

Sum up the results of the year with Denis Lebedev – the expert and the founder of calmins.com, the considered insurance.

After the 2020 – year of pandemic and lockdowns, the year 2021 comes with optimism.

Here are top 10 main features, in some ways even long-term trends of insurance market in 2021.

Executive summary:

  1. The rapid growth of the market despite the prognosis
  2. High profit of Insurance market in 2020
  3. The Companies that left market
  4. When will Foreign Insurers come to Russia?
  5. Renaissance Insurance and IPO
  6. 100 years Anniversary of Rosgosstrakh and Insurance market in Russia
  7. Expecting the growth explosion of online insurance in the nearest 3-5 years
  8. How to maintain business with 710-P?
  9. OSAGO: what had changed in 2021 and what is expected to change in 2022?
  10. Struggle for survival: the Insurance market in 2022

1. Explosive growth of insurance market more than 20% despite the expected 5-10%

Despite there was no fall of insurance payments in 2020 (the expected fall was about 15-20% to 2019), there was rapid growth in 2021. Investment life insurance (ILI)+ Endowment life insurance (ELI) and Credit life insurance became the main drivers. Most importantly that Investment life insurance entered into a positive phase after 3 years of falling. Almost all types of insurance showed growth despite the conservative forecast of 5-10% growth. According to forecasts the volume of collected premiums exceeds 1,8 trillion rubles in 2021, and Life insurance reaches 550 billion rubles.

Top 10 main events of Russian Insurance Market - expert opinion

Top 10 companies (Life and Non-life) continue to grow and in 2021 reaches 73% of the market.

2. High profit of insurance market in 2020.

As the results of 2020 can be seen only in 2021, the profit of Insurance Market in 2020 is 247,5 billion rubles, not much but a little over the results of 2019.

Top 10 main events of Russian Insurance Market - expert opinion

Although there was a fall of Insurance activity, the growth was provided by investment activity and by revaluation of currency assets. See our previous reviews about Top 10 Insurance Company’s financial achievements.

Top 10 main events of Russian Insurance Market - expert opinion

High profit achieved by the reduction of Auto Insurance and Voluntary Health Insurance claims. However, 2021 on the other hand shows the increase of insurance compensation average value. That leads to relative reduction in Insurance market profit. But probably, as a result of the year, there will be a growth of profit in absolute numbers.

3. Leave market and license revoke

The following Companies left market for the last 9 months:

  • DalJaso, JSC
  • Sibirskiy Dom Strakhovaniya, LLC
  • Geopolis, LLC
    BIN Insurance, LLC
  • Prestige Polis, JSC
  • Renaissance Zdorovie, JSC
  • Saklau Mutional Insurance Society

One of the biggest events was Asko’s Insurance license revoke on December,3. That happened because of breaking the rule for minimum allowed for equity ratio and commitments.

Notice the great loss in 2020 when 27 companies left the market.

  • Panatseya, LLC
  • Ingvar, JSC
  • Retail and Corporate Insurance, LLC
  • Chuvashiya Med, JSC
  • Media-Vostok, LLC
  • Kairos, LLC
  • UralSib, JSC
  • Med Insurance Company Nadezhda, JSC
  • Transnational Insurance Company, LLC
  • Insurance Company Nadezhda, LLC
  • General Insurance Sociaty Plato, CJSC
  • Spasskie Vorota-M, JSC
  • Insurance Company Uspeh, CJSC
  • Railway Insurance Fund, JSC
  • VTB Med Insurance, LLC
  • Industrial and Commercial Insurance Company, LLC
  • Insurance Company Surgutneftegas, LLC
  • Joint Insurance Verna, LLC
  • National Insurance Group Rosenergo, LLC
  • Insurance med company UGMK Medicine, LLC
  • Insurance Company ROSINCOR Reserve, LLC
  • Insurance Company VITAL Polis, LLC
  • Company of Bank Insurance, LLC
  • VTB Life insurance, JSC
  • Mutual Insurance Company Narodnie Kassi
  • Consummer sociaty of mutual insurance of developer commitments
  • Insurance Company SERVICERESERV, LLC

Hope next year 2022 there will be less losses and most companies will keep their licenses.

4. Second Coming of foreign agents in Russia

On July,1 the law was enacted that gives the possibility for foreign companies to come into Russian market. Changes have been made in the Act of Russian Federation on organization of insurance business in Russian Federation, dated on 27.11.1992 #4015. According to the law, foreign affiliates provides the security deposit in DIA, that equal to share capital of Russian companies, must have license for all type of insurance, and reports to Bank of Russia.

At the moment, in Russia there are companies with foreign ownership such as Allianz (100% of Alliance JSC and Alliance Life LLC), Generali (about 40% at Ingosstrakh and Ingosstrakh Life affiliated company), AXA (about 40% at RESO-Garantia), Societe Generale (Rosbank PJSC and Societe Generale Life Insurance LLC), Raiffeisen Bank International (Raiffeisen Bank JSC and affiliated Raiffeisen Life LLC), Group PPF (Home Credit Bank and PPF Life Insurance LLC).

Top 10 main events of Russian Insurance Market - expert opinion

At the same time MetLife has left Russian market, insurance portfolio was sold to Group Sovkombank (Sovkombank Life JSC and Sovkombank Insurance JSC).

At the begin of the year there were discussion about Reso Group, and its possible selling to Generali. That occurred while Axa was selling its affiliates in Europe and in the World. RESO-Garantia being the 1st insurance company in Russia, having a good financial results and having paid the dividends recently (comparing with Ingosstrakh that 40% share Generali), seemed very attractive to Generali. Negotiations have been postponed to 2022, and there is high possibility nothing will come of it.

Renaissance Insurance Company has recently done the IPO and is traded at Moscow Exchange now. Therefore, foreign stock holders are the investors. But let’s talk about Renaissance in more detail.

 

5. The IPO of Group Renaissance Insurance: Expectations Vs Reality

After Group Renaissance had sold the shares to NPF Blagosostoyanie (one of the structures of Abromovich), the company held successful IPO. The price of initial offering was 120 rubles, and the maximum was 125 rubles. However, after two months stock price at MOEX drops below 100 rubles. At the same time Boris Jordan announces his plans to make an SPO in a year.

Group Renaissance Insurance PJSC also include 100% of its affiliate Renaissance Life LLC, that offers a life insurance. Further the Group Renaissance includes Renaissance Health JSC, Digital Health Technologies JSC, Medcorp LLC, Renclinic LLC and some others. The insurer is positioning itself as an innovative insure-tech and fintech company.

Top 10 main events of Russian Insurance Market - expert opinion

The Group cumulative fees amounted to 74 billion rubles (that is 26% above the market) by the end of 9 months. Level of payments was about 40%, almost 6 million of contracts (+35%). Life insurance ratio is over 50%.

6. 100 Years Anniversary of Rosgosstrakh, how to survive?

The oldest company in Russia Rosgosstrakh celebrated its 100 years on 6th of October.

The Group Rosgosstrakh has affiliates and representative offices in all parts of Russia. It is number 5 in insurance market by the end of 9 months and is the part of the Group Otkritie that belongs to Bank of Russia. Rosgosstrakh Life (the affiliate of Group Rosgosstrakh) is also number 5 in life insurance market in Russia. During the last few months there was discussion of selling the group. Among the bidders for the company were Rossium Concern, Gazprombank, VTB, Sogas and even Generali. But it seems that negotiations ended to nothing and Rosgosstrakh together with its parent company Otkritie is going to hold an IPO according to the plan. Apparently, there were no buyers for whole lot (banks of Group Otkritie, insurance and pension business) that cost 1 trillion rubles. Recent consolidation of bank assets (affiliate Trast Bank and RGS Bank) indirectly confirms the idea of IPO.

The regulation 710-P lead to first knock down, but when ex-affiliate Capital Life Insurance levied 12 billion that was unexpected and brought to more difficult situation. Fortunately, that will not affect the clients because the company belongs to the State (Bank of Russia). But still there are doubts about efficiency of management.

7. The growth of online channels and expectation of 10% increase in 2024

Online insurance market is growing rapidly, however it still 5% of the market and mostly it’s OSAGO. Generally, the scale up to significant value is expected in Russia.

Relying on our research the forecast growth of web market is above 200 billion rubles to 2024, and in favorable case can exceed 0,5 trillion.

Top 10 main events of Russian Insurance Market - expert opinion

In January 2022 refined data is preparing and updated report will be available in our shop.

8. 710-P: requirements for financial sustainability and solvency

Since November 2021 according to 710-P regulations the revaluation of equity is being obligatory for all insurance companies. New rules forced the insurers in Russia to increase share capital, due to new calculation method the assets that had been included in own funds now became excluded.

9. Discussion of changes in OSAGO: the growth of liability limits and rate range expansion

In 2021 Vehicle inspection (TO) was detached from compulsory motor third party liability insurance OSAGO. After that the increasing of cover level for life and health insurance, property damages and further expansion of rate range are being discussed.

The separation of Vehicle inspection and OSAGO

In 2021 it became possible to insure non-commercial vehicles without vehicle inspection. Whether it was a proper decision or not, any vehicle can cause a danger, and every driver is responsible for technical condition of his car. Especially due to recent growth of car accidents that was caused by car malfunction. But there will be less cavils by GIBDD if a driver voluntarily passed the inspection and car diagnostic information is available. Commercial transport as taxi, trucks, buses are supposed to go through regular inspection.

Expanding the range

For the last 5 years the Bank of Russia took measures to OSAGO rate liberalization. In September 2020 rate individualization depending on client’s profile came into force, that made the calculation of policy cost opaque. The OSAGO coefficients have changed.

However, that didn’t cause rate increase, only 1-2% growth for the last 9 months. But for sure a ‘good driver’ has lower rate than a ‘bad driver’. For a ‘good’ one there is a 30% discount offer in a marketplace.

Nevertheless, the OSAGO average rate will continue to increase because new cars raised in price and the lack of auto parts.

Insurance payments increase without accounting of car wear coefficient

For the last few years the increase of coverage up to 2 million rubles is being discussed for the third-party liability in case life and health damage, and no increase for property damage. Recently, this niche has been occupied by CASCO contracts, a voluntary motor third-party liability insurance with a franchise equal to the OSAGO limits. However, not all insurers are able to provide such protection to their clients, more often only if there is a CASCO contract.

Obviously, if they take measures in 2022 it will lead to a significant rate increase. According to our experts, it will be at least 30%. At a sufficiently high inflation in Russia and a general increase in the cost of living, this could lead to a decrease in the number of insured and an increase in the sales of fake policies, which is now 10% of sales, about 10% of drivers don’t have any policy at all.

It is intended to prohibit insurance companies to include the wear of the car and damage in an accident when calculating the payment for repairs. Now the policy covers the cost of the car or the cost of repairs. The Bank of Russia (Central Bank – ‘CB’) supports step by step changes to avoid rapid price increase, that would be painful for the drivers.
The fourth proposal of CB is obligatory vehicle inspection for taxi, buses, trucks and all commercial transport.

10. Struggle for survival: what year 2022 brings to insurance market?

Lines that had being discussed in 2021:

  • test for client’s qualifications (those who buy complex investment products such as ILI and ELI)
  • regulations for credit insurance
  • changes in CB’s instruction #5055-y
  • appearance of shared life insurance
  • deposit safety (the same as for 1,4 million rubles) by DIA in 2022.

Testing the qualification of clients-investors

The test was unified by Insurers in 2021 according to recommendations and regulations of CB. It was successfully implemented and helped to reduce by half complains about miss selling.

Credit Insurance

To give the clients option to choose the insurer for credit products, FAS interferes in regulation of credit insurance. Together with CB it is planning to establish strict regulation and unification of policy terms.

In 2021 credit insurance is fastest-growing market. Most importantly that bank premiums are about 90% and there are only 1 or 2 insurers in the bank, that limits competition. Probably, due new regulations premium reduces and credit rate reaches its real value (without camouflaging with insurance). The market is supposed to get transparent and competitive, but with less profit of credit organizations.

Proposed changes to Regulation #5055-y now is Regulation #5968-y

At the begin of 2022 we will make series reviews.

Plan to issue changes for Regulation #5055-y ‘Minimum Requirements to voluntary life insurance on the terms of periodic insurance payouts (rents and annuity) and the participation of the insured in investment income of the insurer.

On December, 22 2021 the final version (the 3rd version) appeared on CB’s web that as a result became new Regulation#5968-y.

The main idea of changes is to protect clients that have insurance contracts below 1,5 million.

Short list:

  • Set minimum survival payout not less than total premium
  • Death payout is supposed to be set not less that total premium in case of a lump sum, and or it can be multiplied by a coefficient (depending on age of insured or term of contract), by total premium for the first year of contract if taken in installments.
  • In case of breaking the contract the period for refund is 30 days or until third regular premium.
  • Circumstances of importance if insurance event occurred are limited by socially significant diseases according to the established list of The Government of Russia and not by the list of diseases developed by the insurers individually for each product.
  • Obligatory formula to calculate profit in case the end of commitment due to its fulfilment.

обязательная формула для расчета доходности по договорам, по "которым обязательства прекращены исполнением"

From the one hand this is the right step toward consumer and unprotected segment of life insurance (ILI and ELI) the sum insured below 1,5 million rubles. However, this is hard to perform for the market, especially in risk and rate valuation, and leads to average premium growth.

Find more information about in our review ‘Struggle for Survival: What Year 2022 brings to ELI?’ on page Articles.

Shared life insurance

Probably shared Life Insurance will replace the ILI, but it’s hard to believe that it will be a large part of the market in 2022 as well as 2023. Though it is expected to reduce miss selling. The contracts don’t protect the assets, and must become more transparent comparing to ILI but is for the use of only qualified investors that are ready to take all risks in addition of high profit.

The option of releasing a single license for both management companies and insurers is being discussed.

Protection of life insurance accumulations in DIA

The discussion with Bank of Russia is well under way and next year there is high possibility of implementation the protection of accumulations under 1,4 million rubles in a similar way that protection of bank deposits. Whereby it is discussed that payments to DIA for insurers will be low than for credit organizations.

According to expert opinion such protection will increase clients’ confidence in insurance products and make them invest their saving into long-term tools.

Summary

Эксперт страхового рынка Лебедев Денис
Expert: Denis Lebedev

It is important to say that year 2021was quite positive and promising. In 2022 ‘life’ insurers will struggle for survival but will find their way. Online channel will develop with help of huge bank insurers group.

Because of serious unification of credit and mortgage insurance there might be decrease in the market as the increase of competition and bank commission reduction. At the same time there will be more transparency and competition in the market.

Also, in 2021 new era of insuring began (see our review about ‘Mango insurance – the market comes out of the darkness‘ and the brand new article ‘Mango Muffin – a million cost fintech startups, what’s next?’)

Up to date data, analytics and insurance market forecast on calmins.com – the considered insurance.

This article is approved by the expert Denis Lebedev

Calmins.com ©

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