Development of the direct insurance in Russia: to achieve efficiency

Insurance innovation: the main idea of direct insurance consists not in savings on agency commissions but rather in use of new technologies and powerful IT system. The opinion that there is nothing new in direct insurance is mistaken. Direct insurance is really a new type of service for insurants (remote execution of a policy) and new standards of underwriting for insurers (higher segmentation of the market, taking into account a larger number of tariff factors, possibility to efficiently assess demand for various insurance products and flexibility thereof, higher flexibility in the price policy).

Savings in the future: until direct insurers are investment projects, their expenses significantly exceed average market indicators. According to estimates of Expert RA, the share of expenses for conduct of business borne by direct insurers exceeds the average market level more than twice (95.2 against 44.0% - according to data over the first half of 2009). This result refutes the idea that expenses of direct insurers are less than expenses of traditional companies, at least, in the short term.

In the long-term perspective expenses of direct insurers are less than expenses of traditional companies. The time of achievement of the pay-back point depends on the level of prolongation of contracts and development of cross sales. However, reduction of the level of expenses can not always compensate higher net losses in case of direct insurers. In countries where the share of direct insurance is not high, operations of direct insurers are ineffective notwithstanding lower expenses associated with business conduct.

A billion directly: according to estimates of Expert RA, the amount of premiums gained within the framework of direct insurance in the first half of 2009 amounted to 0.9 billion rubles. The share of direct insurance in aggregate market premiums over the first half of 2009 amounted to 0.3%, in premiums for car insurance in general - 0.8%.

The example with electronic tickets refutes the thesis that the population is not ready to use services of direct insurers. Development of direct insurance depends on changes in laws (cancellation of the compulsory documentary form of the policy), quality of services and reliability of direct insurers. According to the world practice direct insurers may realize saving on scale after covering over 5% of the insurance market.

According to forecasts of Expert RA, in 2009 the aggregate amount of premiums received under direct insurance will reach 1.9 billion rubles increasing compared to 2008 by 130%, in 2010 - 3.1 billion rubles (+70%)2. In 2011, upon withdrawal from the crisis, universal insurers will also start up projects for direct insurance which will accelerate growth in this segment. By 2012 the share of direct insurance in aggregate premiums for car insurance will reach 7% (unless the laws are changed) or 12% (if it will be permitted to issue policies in the electronic form).

Adjustment to the crisis: as a result of the crisis rates of increase in the level of penetration of direct insurance technologies into the business of Russian insurers have significantly slowed down. On the one hand, increase in the cost of financing led to postponement of start-up of direct insurance projects of universal companies. On the other hand, risks of companies dealing with direct insurance depending on investments from owners grew up. The positive influence of the crisis on which direct insurers insist consists in change of the consumer behavior of insurants (in favor of a more active position while choosing an insurance company) as well as reduction of advertisement and marketing expenses.