Expert RA

Expert RA: the insurance retail market speedy development hides in-depth problems

May 14th, 2008

Expert RA 2007 analyses together with National Agency for Financial Studies proved the retail insurance market collections to be 227.6 bln rubles with the double increase comparing to 2005. Further retail growth areas are autoCASCO, property insurance and life insurance. The 2007 retail insurance leaders aree Rosgosstrrakh, RESO-Guarantee, Ingosstrakh, ROSNO and VSK.

Retail insurance share in 2007 in the segment of direct scheme-cleared insurance (without OMI) came to 52.1%. Actually, the retail segment presently exceeds half of the whole Russian real insurance market collections.

According to Expert RA, within the last three years the retail insurance market total payments fluctuated between 49.8-50.5%. In 2007 the figure reached 50.2%.

The retail insurance market players, despite its energetic development, still have to face a number of obstacles. First, it is difficult to interact with distribution channels. Imperfect legislation for selling insurance products through banks poses a serious problem – alleged fight for honest competition in reality prevents insurers and bankers from making and selling truly modern and client-friendly products.

An insurance agent has always been a traditional channel for distributing different retail insurance products. At present Russian insurance agents mostly operate for several clients at the same time, with the exception of novices. Such a MO disrupts normal activity at the insurance market and brings about dumping practices.

Dumping has truly become a decelerating factor at the retail insurance market. Dumping is often the case in autoCASCO, OSAGO and life insurance. AutoCASCO dumping is mostly done through reduced tariffs, OSAGO – through increased commissions to insurance agents (against the law).

Another negative trend at the insurance market is fraud. Losses from fraud equal to 10% of retail insurance collections, namely, about 23 bln rubles in 2007. The disease is hard to cure due to lack of evidentiary proof, and trials against cheaters do not happen very often.