Insurance market: main trends in 2019
The amount of insurance premia remained almost the same in 2019 as compared to 2018, totalling 1.48 trillion rubles, while the number of signed insurance contracts increased by 2.6%, to 207.8 million.
According to the Review of Key Indicators of Insurers, the stagnation of insurance premia amid the growing number of concluded contracts was associated with changes in the structure of the market. On the one hand, demand grew in those insurance areas where average insurance premia are not high, e.g., in borrowers’ life insurance and voluntary health insurance (VHI). On the other hand, the number of contracts declined in the insurance areas with high average premia, namely in long-term life insurance and corporate property insurance.
Premia in life insurance (excluding borrowers’ life insurance), which had been the industry’s main growth source over the last four years, decreased by 19.2% in 2019, to 317.5 billion rubles. The number of contracts concluded in this segment shrank as a result of a reduction in misselling cases owing to higher sales standards. Another factor could be a relatively low level of returns (compared to other financial instruments) under investment life insurance contracts that expired.
At the same time, new areas have emerged in the insurance market, and they may become long-term drivers of development. First and foremost, this is voluntary health insurance. The amount of VHI premia increased by 19.0%, to total 180.8 billion rubles. The growth in this segment accelerated owing to changes in its structure — conventional all-risk VHI is giving way to more affordable insurance plans with a reduced set of services and (or) with a franchise.
In addition, individuals’ sustained demand for borrowing also positively influenced the insurance market in 2019. The overall growth rate in borrowers’ life insurance and in accident and health insurance totalled 22.1% by the end of 2019. That said, the growth of insurance premia slowed down compared to 2018, which correlates with changes in the amounts of loans extended.
The first stage of the customisation of insurance rates was the key event in the compulsory motor third-party liability insurance (OSAGO) market in 2019. Due to higher competition, the average cost of an insurance policy dropped by 4.8%, to 5.4 thousand rubles. The total amount of insurance premia was down by 5.3%, to 213.9 billion rubles. Payments under OSAGO contracts grew by 2.4% to 141.2 billion rubles. According to the Bank of Russia’s assessment, there was an increase in the number of regions which were loss-making for insurers under OSAGO contracts. Further progress in insurance rate customisation in the mandatory auto insurance segment will enable insurers to improve the management of insurance risk and the economic feasibility of insurance rates offered to particular car drivers.
By the end of 2019, insurance reserves exceeded 2.5 trillion rubles (+37.3% YoY), with reserves under life insurance contracts accounting for 47% of this amount. Insurers’ net profit totalled 207.4 billion rubles over 2019, increasing by 25.7% year-over-year.
The size of the insurance market in 2020 will be largely influenced by household lending growth rates and the efficiency of further promotion of VHI plans. Demand for long-term life insurance will depend on the scope of insurance plans and their competitiveness as instruments that are interesting to individuals for investing their funds. In addition, further customisation of rates in mandatory auto insurance will also impact insurers’ performance in 2020.