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A few figures and facts that indicate that the insurance market in Ukraine is not developing as vigorously as they sometimes try to present it. Why?
The discussion about changing the regulator in the insurance market (as well as in the non-banking financial services market in general) has been going on since 2015. But both opponents of the changes and their supporters focus mainly on technical nuances - who will perform which functions, what powers will appear or disappear from whom. And few people talk about the state of the market, its problems.
And despite the statements of some experts that everything is fine and everyone is satisfied with everything (in the end we will understand why some companies are really satisfied with everything), there have been a lot of them.
While the global insurance market is concerned about the integration of artificial intelligence and big data into processes, is engaged in machine learning and is developing insurance programs for driverless cars, the Ukrainian insurance market is busy with much more mundane issues - how to maintain at least the existing level of income. And so far this is being done mainly at the expense of mandatory types.
The mandatory nature of insurance of certain risks is dictated by the state. We have 40 mandatory types, for many of which it is impossible to receive compensation in principle, but this is a topic for a separate conversation. The presence of such types of insurance does generate additional cash flow to insurance companies. But it also imposes certain obligations on the state. And the most important of them is to ensure the quality of services that insurers provide to their clients.
According to the current regulator of the insurance market - the National Commission for Financial Services - the largest number of complaints received by them in 2017 - 5321 - concerned the most massive mandatory type of insurance - MTPL (mandatory motor third party liability insurance). Unfortunately, there are not rare cases when companies openly dumped, selling Avtocivilka policies, and then simply disappeared from the market without paying their clients. In total, in 2017, insurance companies that left the market owed their clients no less than UAH 316 million.
At best, the clients of these unfortunate companies will receive their money from MTIBU (the Motor Transport Bureau of Ukraine, which acts as a "guarantor" of payments under OSCPV). At worst, they will be left alone with the costs of repairing their own and other people's cars, and maybe even treatment. What should the state do in this case? That's right, regulate the market and check its players so that such "phantom companies" it just wasn't.
In fact, there are almost 300 insurance companies operating in the Ukrainian market, of which 50 companies collect more than 90% of all insurance premiums. That is, the remaining 80% of companies account for less than 10% of clients. Does this distribution not alarm anyone? Does it raise questions about how 244 companies with such a meager market share survive? And do they not leave it? Unlike large companies.
After 2004, large international insurers came to Ukraine (AXA, PZU, GENERALI, UNIQA, VIENNA INSURANCE GROUP, FORTIS, AIG, AEGON and others), investing, in addition to many years of experience in successful insurance business, modern IT technologies and intellectual developments, more than $500 million in direct investments. Unfortunately, at this point GENERALI, FORTIS, SEB, HDI, AEGON, AIG and QBE have left the market. The reason is its opacity, distrust of customers, chaotic legislation. As a result, the Ukrainian market has become so unattractive for global insurance giants that they have curtailed their work here. And 244 Ukrainian companies that operate virtually without clients who do not curtail! Surprisingly.
Another fact that leads to certain conclusions about the direction of the insurance market today is the share of reinsurance. The volume of reinsurance in 2017 grew by 72%! Of the 30 largest insurance companies (by the volume of collected premiums), 8 insurers sent more than 90% of the money received to reinsurance. Such figures may indicate the use of insurance companies for tax optimization. After tightening requirements for banks in the context of disclosure of information about owners, non-bank financial institutions remained the "last resort" for dubious transactions, because many schemes have now "moved" to non-bank financial institutions, access to information about their beneficiaries is still very limited.
First of all, consolidated supervision will be affected. A single regulator will see all transactions on the entire financial market, and the opportunities for the so-called "regulatory arbitrage" - when unscrupulous companies can abuse legislative "gaps" in various types of regulation - will significantly decrease.
In addition, so far only the NBU has experience in risk-oriented supervision, when problems of market players are detected preventively, and not after a violation / complaint. From the point of view of protecting the interests of clients, it is much more effective to calculate "problematic" in advance companies, and not to run after them on their tracks, when with a high degree of probability the money could have been withdrawn long ago, and only a table and a chair will remain in the office.
Well, and globally - today the NBU is responsible for financial stability according to the mandate. But in fact, one cannot be responsible for financial stability and not have instruments of influence on the market. Only the latter is "clean and transparent", and the former, as can be seen from the above facts, cannot yet boast of such a characteristic.
The fact that a single, institutionally more mature, regulator, at least in economically difficult times, is more effective than several, is also confirmed by international studies. Thus, according to a recent (April 2018) report by the Basel Institute for Financial Stability, many countries that were most affected by the consequences of the global financial crisis have transitioned their financial market supervision model to an integrated one, with the transfer of supervisory functions for all players to their central banks.
Will the people's representatives listen to the arguments of both Ukrainian and the world's most authoritative experts in financial supervision - Basel experts, and vote for the law on the consolidation of the functions of state regulation of financial services markets? We will find out this fall.
Source:delo.ua
Author: Yevgeny Stepaniuk (Head of the Financial Sector Reform Department of the National Bank of Ukraine)
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