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At year-end 2017, Russia’s life insurance market maintained growth rates

It accounts for a third of total premiums. The remaining areas of insurance have shrunk, which, according to experts, is caused by the withdrawal of insurance companies from regional markets and reduction of supply as a result. It is particularly pronounced in the Crimea, where the insurance market is in its infancy.
At year-end 2017, Russia’s life insurance market maintained growth rates

For good health

Life insurance in Russia began to grow from 2013, when the growth for the year was 28 percent. In 2016, this indicator was 66 percent, and at the end of 9 months of 2017 - 56.6 percent. At the moment the share of life insurance has reached 24 percent in total. The average premium is growing: from 41 thousand rubles in H1 of 2016 to 67 thousand in 2017.

“For the first time, Russia’s top ten insurance companies included three organizations dealt specifically with life insurance,” Yevgeny Gurevich, member of the All-Russian Insurance Association (ARIA) says. “In other words, this area/stream turns from a small segment into a full-fledged large industry.

The briskest growth is experienced in investment life insurance which accounts for 91 out of 141 billion rubles in the total basket. Experts attribute this to increase in the number of people who already have the means willing to multiply them.

“With low deposit rates in banks, clients seek an opportunity to outperform the inflation through an alternative product, thereby giving impetus for development of investment life insurance,” Maxim Chernin, chairman of ARIA Committee says. “It, in turn, pulls up a cash-value life insurance, as it happens all over the world. But, in spite of good growth rates, life insurance in Russia makes only 0.3 percent of GDP. At year-end 2017, we are outperforming Turkey in this segment, but very far behind the Eastern Europe, where the standard equals 1.5-2 percent, and ten times behind the Western Europe where this figure is 7-9 percent.

The growth of sales of life insurance is largely due to banks with their networks selling more than 85 percent of policies. There is also an increase in direct sales and sales through agency networks, which is considered by experts as a positive trend in increasing the availability of policies. As of first half of the year, seven million Russians, or five percent of the population, insured their lives. ARIA believes that this is a very low penetration and predicts the growth of the life insurance segment in 2018 by another 30-40 percent.

In Crimea, the youngest Russian region, the growth of life insurance is still extremely modest, although all three large banks have been offering insurance products for several years. More often the Crimeans buy “life” policies in a package with top-requested compulsory motor TPL (OSAGO).

For the record:

Over the past five years, the number of insurance companies on the Russian market has dropped virtually by half, that is to 230, and now one insurer accounts for 635,000 people, which is much lower than in Europe and the United States. In 47 regions of the Russian Federation there are no registered regional insurance companies at all. The share of companies collecting fees less than five billion rubles in 2014 was 25 percent of the market and in 2016 - 17 percent. In 2017, 10 regions collected 73 percent of the total premiums.

The reduction in the number of insurers was a consequence of market cleaning executed by the regulator who has tightened the requirements for participants. This trend is likely to continue in 2018 as well, if the State Duma adopts a bill that increases the size of the charter capital of insurance companies from 120 to 300 million rubles. As a comparison: in Europe, the regulation of capital starts at 175 million rubles.

Author: Olga Koteneva (Simferopol)

Photo: Anton Denissov/ RIA Novosti newswire


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