Russian Insurance Market in 2009: Ice age

An evolutionary turn: the first large-scale recession in the Russian insurance market resulted in change in the target guides of insurers, their owners and insurance supervisors. In 2009 the volume of the Russian insurance market reduced by 7.5% (or 41.4 billion rubles). At that, the level of payments grew up by 10.5 percentage points, the share of top-5 companies in terms of premiums reached 40.8% (+5.0 percentage points), the share of top-20 companies - 69.8% (+4.6 percentage points).

However, the most important changes affected not the quantitative part but ideology...

From fast growth to stable growth. Insurance retail and bank insurance were the most promising segments of the insurance market before the crisis - turned from leaders of growth to leaders of decline, became sources of problems and increase of loss. In 2009 insurers took all efforts to diversify their portfolios increasing the share of the corporate segment.

From agents to insurants. If earlier high fees of insurance agents enabled them to rapidly increase their market share, then under the crisis conditions opportunities for agents reduced significantly. At that, cases of their unfair behavior became more frequent. As a result, insurance companies re-orient their marketing policy towards insurants: update and expand the line of insurance products, use franchise more actively, create inexpensive insurance products, develop direct insurance.

From capture of the market share to increase in profitability. Before the crisis the leading strategy of owners of insurance companies was capture of the market share and further sale of the insurer. Now their main target is survival. The key target indicators - liquidity, loss-making, profitability. As a result of optimization of business processes in 2009 a boom of restructuring of insurance groups, mergers of insurance companies under a single legal entity has been observed.

An evolutionary turn: the first large-scale recession in the Russian insurance market resulted in change in the target guides of insurers, their owners and insurance supervisors. In 2009 the volume of the Russian insurance market reduced by 7.5% (or 41.4 billion rubles). At that, the level of payments grew up by 10.5 percentage points, the share of top-5 companies in terms of premiums reached 40.8% (+5.0 percentage points), the share of top-20 companies - 69.8% (+4.6 percentage points).

However, the most important changes affected not the quantitative part but ideology...

From fast growth to stable growth. Insurance retail and bank insurance were the most promising segments of the insurance market before the crisis - turned from leaders of growth to leaders of decline, became sources of problems and increase of loss. In 2009 insurers took all efforts to diversify their portfolios increasing the share of the corporate segment.

From agents to insurants. If earlier high fees of insurance agents enabled them to rapidly increase their market share, then under the crisis conditions opportunities for agents reduced significantly. At that, cases of their unfair behavior became more frequent. As a result, insurance companies re-orient their marketing policy towards insurants: update and expand the line of insurance products, use franchise more actively, create inexpensive insurance products, develop direct insurance.

From capture of the market share to increase in profitability. Before the crisis the leading strategy of owners of insurance companies was capture of the market share and further sale of the insurer. Now their main target is survival. The key target indicators - liquidity, loss-making, profitability. As a result of optimization of business processes in 2009 a boom of restructuring of insurance groups, mergers of insurance companies under a single legal entity has been observed.

From fighting against schemes to fighting against insolvency. If previously the activity of the Federal Service for Insurance Supervision was almost fully aimed at suppression of activity of scheme companies, now the supervisory authority has to reorient towards fighting against insolvent insurers. In the absence of any adequate tools for early identification of financial distress of insurers, complaints of insurants became virtually the only ground for suspension and withdrawal of the license from insolvent companies. Adoption of amendments to laws "On Organization of the Insurance Business" and "On Insolvency (Bankruptcy)" enabled the Federal Service for Insurance Supervision to expand its tools in its fight against insolvent companies.

The fate of dinosaurs: the companies that did not manage to reorganize their business according to new conditions, will have to leave the Russian insurance market. According to forecasts of Expert RA, by the end of 2010 a bit more than 500 insurance companies will remain in the Russian insurance market without considering life insurers and medical insurance organizations (total about 350 companies). Universal companies oriented towards the client and relying upon losses management will get competitive advantages.

Waiting for warming: according to estimates of Expert RA, the Russian insurance market may reach the pre-crisis level of 2008 only by 2011. In 2010 the volume of the Russian insurance market will reach 532.3 billion rubles increasing by 3.6% in comparison with 2009. Accelerated development of the market is possible only with introduction of new large-scale compulsory or imputed types of insurance (insurance of especially hazardous facilities, fire-safety insurance, insurance of carrier liability), otherwise, the market will restore slowly.

The following types of insurance will contribute the most to market growth in 2010:

• Voluntary Medical Insurance (+9 billion rubles or +12% (in terms of rate of growth in premiums)).
• CMTPL (Compulsory Motor Third Party Liability (+5 billion rubles or +6%).
• Individuals’ property Insurance (+1,5 billion rubles or +7%)
• Insurance against accidents and diseases (+1,5 billion rubles or +5%).

Negative rates of growth in premiums in 2010 will remain in the following types of insurance:

• Insurance of agricultural risks (-1 billion rubles or -10%).
• Life insurance (-1 billion rubles or -7%).
• Insurance of liability for non-fulfillment of obligations under state and municipal contracts.

The fate of dinosaurs: the companies that did not manage to reorganize their business according to new conditions, will have to leave the Russian insurance market. According to forecasts of Expert RA, by the end of 2010 a bit more than 500 insurance companies will remain in the Russian insurance market without considering life insurers and medical insurance organizations (total about 350 companies). Universal companies oriented towards the client and relying upon losses management will get competitive advantages.

Waiting for warming: according to estimates of Expert RA, the Russian insurance market may reach the pre-crisis level of 2008 only by 2011. In 2010 the volume of the Russian insurance market will reach 532.3 billion rubles increasing by 3.6% in comparison with 2009. Accelerated development of the market is possible only with introduction of new large-scale compulsory or imputed types of insurance (insurance of especially hazardous facilities, fire-safety insurance, insurance of carrier liability), otherwise, the market will restore slowly.

The following types of insurance will contribute the most to market growth in 2010:

• Voluntary Medical Insurance (+9 billion rubles or +12% (in terms of rate of growth in premiums)).
• CMTPL (Compulsory Motor Third Party Liability (+5 billion rubles or +6%).
• Individuals’ property Insurance (+1,5 billion rubles or +7%)
• Insurance against accidents and diseases (+1,5 billion rubles or +5%).

Negative rates of growth in premiums in 2010 will remain in the following types of insurance:

• Insurance of agricultural risks (-1 billion rubles or -10%).
• Life insurance (-1 billion rubles or -7%).
• Insurance of liability for non-fulfillment of obligations under state and municipal contracts.