In what ways does the Russian insurance market differ compared to western countries?
One main difference is the low penetration of insurance. The Russian P&C insurance market is less developed compared to the Nordic market. Approximately 15 % of commercial property is insured in Russia, and only 5 % of private households have insured their property.
Also, the market is still fragmented even as the number of market players is decreasing. There are still approximately 750 insurance companies. Most of them have very low capitalization and are specialized in one or two insurance products (motor and TPL).
Furthermore, the top 20 companies hold about 60 % of the market and the number of professional brokers is very low as is the level of insurance awareness and trust to insurance among citizens.
Altogether the insurance market is reflecting uneven rural development as metropolitan areas, especially the Moscow and St.Petersburg areas, are faring better than rural-industrialised. The legal system is still somewhat undeveloped in Russia, as such; it is difficult to defend your rights in court if a disagreement appears.
How important it is to choose a reliable insurance partner?
Very important. For example: Russian terms&conditions are usually very unclear and might be interpreted in different ways, as I referred earlier. On the other hand it is also important to guarantee that you will get compensation when a claim occurs. In that case it is vital that you have chosen an insurer with stable financial strength and capacity to handle also very large risks.
What is the most common mistake when entering Russia from an insurance perspective?
Some companies enter the market with only compulsory insurance coverage. It is important to note that for compulsory coverage the indemnity and service level is very low compared to Western standards.
Clients should also be aware of the fact that automatic renewal of insurance policies does not exist in Russia. The "golden rule" for Russian insurance companies is that first you pay and then the coverage is valid.
Is it even possible to get a proper insurance cover in Russia?
It is possible if you contact an insurance company that understands your business and understands your needs. Check that the products offered are of the same standard which you are used to in your home country
Pay attention to price level. Low pricing might be the first signal of future problems if a claim occurs. In case of large risks always check the reinsurance coverage. As a summary: it is always important to contact an insurer that you can rely on.
How many western insurance companies are there operating in Russia?
In the last ten years several European insurers have made investments in the Russian life and non life insurance market. The number of Russian insurers controlled by them is around 10.
In what way is If better as a partner than its key competitors?
We have one of the highest risk capacities on the market. We are also the only Nordic insurer in Russia and we follow the same service models in all key functions as in the Nordic countries. Very significant is that we exercise the same values in Russia as in any other If country. It means customers can trust we provide true, fair and fast service.
Has global recession affected the insurance market in Russia?
It has, but the crisis can also be seen as a channel for the development of the insurance market. In a challenging economical situation, small, unreliable companies have to leave the market and professional, financially stable companies will stay.
Before the crisis, the Russian insurance market was one of the fastest growing in the world. The property and casualty insurance market was growing at 15 – 20 % per year. Based on the first quarter of 2009, no market growth is expected and recent scenarios estimate an 8 –10 % decrease of the market this year.
The crisis has affected the main drivers of Russian insurance market: motor insurance (the number of new cars acquired dropped with 50 % for 6M 2009) and voluntary medical insurance (many companies are reducing their social packages).
Insurance is still very young in Russia. If has been there for a relatively long time. How has it changed during the last decade and are there radical developments in sight?
Before 1991 (end of the Soviet era) there was state monopoly for insurance and only two state companies existed. In the end of the 90’s there were 2300 insurance companies. Most of them operated in a field faraway from traditional insurance. Since then the number of companies has been constantly decreasing and the rules and requirements from the Russian Supervisory Authority (introduced in 1993) has made the market more transparent.
In 2003 Motor Third Party Liability insurance was introduced in Russia.
On 1st of January 2009 Russia joined the international Green Card system. This means that driving in Russia no longer requires local insurance. It is enough to have a valid MTPL insurance in your home country. However, when an accident takes place in Russia, compensation is paid according to the Russian MTPL law. In Russia the indemnity level both for personal and property injuries is very low compared to the levels we are used to in the Nordic countries.
There have been discussions that next news on the market will be development of a compulsory home insurance for individuals. However in the current situation such a decision from the state would cause very negative political feedback.
Therefore the only radical development in the current financial situation seems to be a further decrease of the number of insurance companies. Small, unreliable companies have to leave the market and professional, financially stable companies will stay. In these circumstances, If has a good opportunity for growth.
