Insurers divided the action plan for overcoming the crisis into short and long-term. Among the urgent measures are a partial job cut and working week reduction, freezing bonus payments, lowering the salaries of top managers, reviewing rental terms and others. As the survey showed, none of LICs seriously considered such a measure of support from the government as raising loans to finance employee salaries.
Measures of expense sequestering are chosen so that a quickly business expansion in full force is possible. When the situation is favorable, market participants plan to consider a strategic action plan to overcome the crisis and reduce costs together with the All-Russian Union of Insurers (ARIA).
According to ARIA estimates, we are talking about a 50% decrease in current sales of insurers, members of the union, the chief of the organization Igor Yurgens told the agency. “The companies have already reduced their costs by 10-15% following that. Similar cost-saving measures are undertaken by insurance unions. Meanwhile, the cost saving task is being solved without the least delay. The insurance market participants agreed to return to the discussion of the situation and hold a strategic session, and, if necessary, formulate systemic approaches in mid-May this year,” Yurgens said.
Regarding the decisions taken by LICs to maintain or cut jobs, the president of ARIA said that companies went in different directions. “Some decide to reduce staff by 10%. Others freeze payments to top managers in excess of the selected and set average value. The payments from the company's premium fund and travel expenses financing are frozen. Trips, general meetings and seminars are canceled. Besides, the companies are particularly encouraged by remote sales, which allow LICs to save costs on doing business,” Yurgens stated.
Some insurance companies, as part of cost reduction with landlords, are considering issues of cutting the amount of rental payments. Others have reduced marketing costs keeping only the most necessary projects and activities in the budget.
Waiting for better times
Banks remain the most common sales channel for insurers. Their share in total sales of insurance products through intermediaries, according to the regulator as of 2019, amounted to 49%. In the face of income and attendance of credit institutions reduction, experts predict a decline in sales in this channel.
As for the agent network, the companies surveyed reported that they did not reduce agent commissions and continued to increase the number of agents.
As previously reported, according to the expert prognosis by the Expert RA rating agency, the insurance market in the Russian Federation in 2020 expects a reduction in premiums of at least 17% compared to 2019 due to the coronavirus pandemic if the crisis ends at the beginning of the second half of the year.
However, some experts believe that the pandemic of the coronavirus infection COVID-19 and its consequences will not hit the Russian insurance industry as much as in the developed western countries, where the financial market and economy are pretty much tied to insurance products. Insurance interest is likely to grow when restrictive measures are removed.
Sources: https://www.insur-info.ru/press/155088/
Photos are from open sources.
