2017 Russian insurance market survey

32 Pages·2017·2.37 MB·English

2017 Russian
insurance
market survey
2017
KPMG in Russia and the CIS
kpmg.ru
Introduction
We are pleased to present you with our eighth annual survey of the Russian insurance
market. The survey sets out the opinions of insurance companies leaders on expected
development trends in the Russian insurance market.
After the Russian insurance market experienced a two-year decline, during which the
volume of premiums fell in real terms, it rebounded in 2016 – a stabilising economic
situation allowed market leaders to generate insurance market growth. The main segment
driving this growth was life insurance, which saw a 150% increase in the volume of
collected premiums. According to insurance companies leaders, 2017 will also see a
signifcant boost from life insurance, which will establish this segment as the largest line
of business. Respondents expect motor insurance to grow at the level of infation, and
Julia Temkina thus relinquish its leading position in the main lines of business ratings.
Partner, According to the survey results, events such as the introduction of a «Unifed agent»,
CIS Head of Insurance electronic policies, and in-kind compensation will continue to have a negative impact on
Services the CMTPL loss ratio. At the same time, we believe the record-low Casco loss ratio (66%)
expected by respondents has already been reached by market leaders. Both of these
factors are forcing insurers to seek out ways to preserve the proftability of the motor
insurance segment.
We invite you to explore the fndings of our survey, and we hope that the information it
contains will shed light on a number of industry facets. We would also like to take this
opportunity to thank our colleagues and partners who contributed, and we also extend our
gratitude to all the respondents – without their participation, this survey would not have
been possible.
Best regards,
Julia Temkina
CIS Head of Insurance Services
Contents
04 Main fndings
06 Insurance market development
16 Loss ratios and expenses
24 Motor insurance
28 Life insurance
4 2017 Russian insurance market survey
Main findings
Real growth resumed in the According to respondents, life Measures adopted in previous
insurance market in 2016. The insurance will be the largest years to reduce administrative
main driver behind this was line of business in 2017. and acquisition costs proved
improved performance in the effective, and led to cost levels
The survey participants expect that
life insurance segment. the life insurance market (growth that in the current situation could
In 2016 insurance market growth rates are at around 30%) will be deemed optimal.
(which exceeded the level of continue to develop actively for two- Against a backdrop of challenging
infation) was due to the efforts to-three years. This sector is set to economic conditions in previous
of the Top-10 players, and led become the market leader this year. periods, insurance companies leaders
to a further consolidation of the Expectations vis-à-vis motor successfully applied a number of
insurance sector in Russia. insurance growth are modest in measures to reduce the burden
of administrative and acquisition
The main ways to boost insurers’ the near term. According to the costs. These measures proved to be
portfolio volumes in 2016 were surveyed insurance company quite effective, and helped stabilise
through increased client retention leaders, growth of Casco and business management costs.
levels, new product development, CMTPL will be 3.5% in 2017,
and creating new sales channels. In which roughly corresponds to the Insurers expect a surge in the level of
2016 this generated growth across predicted rate of infation. acquisition costs in 2017. The majority
C
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The Casco market continued to new technologies, which have
decline. However, insurance leaders already proved successful in foreign
achieved a record reduction in the markets.
loss ratio of this segment, and
this meant that it kept a healthy
proftable level.
© 2017 KPMG. All rights reserved.
2017 Russian insurance market survey 5
A complicating situation in the Respondents expect some
CMTPL market is forcing insurers insurance companies to reduce
to monitor motor insurance sales of unit-linked life insurance
proftability more carefully. products in 2017.
The CMTPL loss ratio reached a peak The improved performance in life
level in the past fve years, and further insurance has ranged across all its
forecasts regarding its dynamics segments, however there has been a
are pessimistic. According to the particularly active distribution of unit-
survey participants, «Unifed agent», linked life insurance products in recent
electronic policies, and claim payouts years. According to respondents,
will negatively impact the loss ratio of the current high growth rates in this
compulsory motor insurance. segment will remain unchanged for
several years. Some respondents will
Insurance company leaders have
begin to review the priority zones for
striven to increase Casco proftability
development as early as 2017.
in recent years, and their efforts
have yielded a record-low level of the
expected Casco loss ratio. We believe
that the Casco loss ratio has reached
the lowest level, and insurers will have
to continue to work hard to maintain
this.

© 2017 KPMG. All rights reserved.
6 2017 Russian insurance market survey
Insurance market
development
Average annual
growth rate
n 2016 record growth in life
insurance gross written premiums
I(66%) was witnessed, which led
to an increase in the entire insurance
market by 15% – signifcantly higher
than the forecast made by respondents
last year (4%).
The most positive dynamics
in collected premiums in 2016 was
characteristically demonstrated
by the Top-10 players,
whose share reached 74%.
© 2017 KPMG. All rights reserved.
2017 Russian insurance market survey 7
Gross written premiums per market segment
Number of
coinmsupraannicees 391 326 251 226
Infation +13% +5% +4% Forecast
Average annual
growth rate +4% +15% +7%
1,200 0%
1,000 –20% +5% 16% +7% 105%
18% +6% 10% +9%
800 23% –10% 11% +19%
13% +15%
600
75%
74%
400
64% 71%
200
0
2014 2015 2016 2017
Тоp-10 Тоp-11 – Тоp-20 Outside Top-20
Source: CBR, KPMG analysis.
Top-10 Russian insurers by gross written premium, 2016
G
5 rinoswutrha ninc eth ceo pmrepmaniuiems sw oafs t hloew Teorp - Company Markeitn s 2h0a1r6e Change iinn G20W1P6 Chansghea irne min a2r0k1e6t
than the market level, which led to 1 Rosgosstrakh 15.5% 1.4% -2.1p.p.
an unusual situation on the Russian
market: the share of the frst fve 2 SOGAZ 12.5% 10.4% -0.6 p.p.
companies fell compared to 2016. This 3 Ingosstrakh 8.2% 23.5% 0.5 p.p.
was due to two factors: 4 AlfaStrakhovanie 7.9% 38.5% 1.3 p.p.
— Rosgosstrakh, the largest Russian 5 RESO-Garantia 7.5% 13.4% -0.1 p.p.
insurer, reduced CMTPL policy
6 VTB Strakhovanie 6.4% 58.7% 1.7 p.p.
sales by 28%
7 Sberbank Strakhovanie 6.3% 68.2% 2.0 p.p.
— The share of life insurance
(the main growth driver) in the 8 VSK 4.5% 11.7% -0.1 p.p.
portfolios of the Top-5 insurers was 9 Soglasie 3.0% 14.3% 0.0 p.p.
less than the average market level
10 R
Sternaakihsosvaannciee* 1.9% 10.3% -0.1 p.p.
*Renaissance Life is not included Source: CBR
Respondents forecast 7% market growth for 2017, with the main
driver remaining life insurance.
© 2017 KPMG. All rights reserved.
RUB billion
8 2017 Russian insurance market survey
According to market players’ Consolidation level of insurance market
expectations, the consolidation will
Forecast
continue both in the Top-10 segment
and for the Top-5 players, and will be
facilitated by a further reduction in the
number of insurance companies: 75
players vacated the market in 2016 and,
according to respondents, another 25 74% 75%
are expected to leave in 2017. 71%
Top-10 market share
64%
Top-5 market share 53% 52% 53%
47%
80% of respondents
believe one or more
companies from
2014 2015 2016 2017
the Top-10 will
participate Source: CBR, KPMG analysis.
in M&A
activity in 2017. A market redistribution of leaders is possible, as a result of M&A activities.
In addition, according to most insurers no transactions with foreign investors
are expected in the near future. Only 10% of respondents expect interest from
foreign investors from Southeast Asia.
© 2017 KPM.G All rithg s reserved.
2017 Russian insurance market survey 9
Gross written premiums per line of business, RUB billion
Forecast
Average annual
growth rate +4% +15% +7%
208
218
146
172
184 138
129 177
124 171
187 214
219 204
187
202 216 276
130
109
151 219 234 243
2014 2015 2016 2017
CMTPL Life insurance Property insurance
Casco VMI Other
Source: CBR, KPMG analysis.
According to respondents’ estimates, Russian insurance participants. For comparison, according to the survey results
market players are quite attractively priced. Based on the for 20142 the pricing multiplies for the Top-10 companies was
survey results, the pricing multiplies1 for companies from 1.3 on average, and 0.6 to 0.9 for smaller players.
the Top-10 is 0.7 on average, and is twice as low for smaller
1 The pricing multiplies are equal to the ratio of the market value of the company to the volume of collected gross written premiums.
2 A new reality: the Russian insurance market: KPMG survey, 2014.
© 2017 KPMG. All rights reserved.
10 2017 Russian insurance market survey
Life insurance
This segment saw 66% growth in 2016, which was quite at odds with the expectations of last
year’s survey participants, who forecast growth of 10%.
The main driver behind the life insurance market is unit-linked insurance, which is actively sold
According to
by insurers’ partner banks as an alternative to deposits. Respondents’ expectations vis-à-vis
2016 results, only the collection of premiums in 2017 are positive: the life insurance market will grow by 28% and
CMTPL has higher by the end of this year will occupy frst place in the gross written premium rating. In addition,
according to half of respondents high growth rates (around 30%) will continue for the next
volumes of signed
two-to-three years.
gross written
premiums than life
insurance.
Casco
The reduction in the Casco market observed in recent years continued in 2016: there was a 9%
decline in gross written premiums. The increase in tariffs and the optimisation of insurance
programmes (deductibles) in previous years enabled insurers to achieve the most proftable
Casco level in the past fve years. In 2017 respondents forecast an increase in premiums by
3.5%, most likely due to an expected rise in the Casco penetration level, following a planned
liberalisation of tariffs.
CMTPL
In 2016 the CMTPL market demonstrated an increase of 7%, which was fully in line with
insurers’ expectations a year earlier. The increase in premiums was due to the residual effect of
tariff increases in 2015, as well as a possible reduction in the number of counterfeit policies and
uninsured motor vehicles. Insurers expect that proceeds from compulsory third-party motor
liability insurance will increase by 3.5% this year, which may be due to a likely recovery of the
auto sales market. In addition, this expected growth may refect changes in the «age» and
«driving experience» coeffcients, which are used by the CBR when calculating CMTPL tariffs3.
Property insurance
The amount of collected property insurance premiums rose by 9% in 2016, in contrast to
respondents’ expectations last year (no signifcant growth was predicted in this segment).
Positive trends were demonstrated by both the retail (17% increase) and corporate (6%
increase) segments. The reason for continued growth in retail most likely remained the active
distribution by insurers of packaged products, including property insurance. The survey
participants forecast a 5% increase in property insurance in 2017.
3 https://www.kommersant.ru/doc/3305413
© 2017 KPMG. All rights reserved.