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The conversation is led by Larisa Semaka with the executive director of NASK "Oranta" Oleksandr Zavada.
– Olexandr Leonidovich, you have been working in the insurance business for many years. We have known you since the time when the domestic insurance market was just being created and you were an active participant in this process, the head of NASK "ORANTA", and later headed (2008/2012) the Ukrainian Insurance Federation. What changes have occurred in the insurance market in your opinion?
– If we were to answer the question in a few words, the closest thing to the current reality would probably be the statement that the market has diversified.
Privatization is complete. Foreign companies of the best world brands have appeared and are playing an increasingly important role. Some of them have already managed to become disappointed in the prospects of the Ukrainian insurance market and left, and some even fled.
Companies of domestic capital have become stronger, trying to compete with global giants. E-commerce has rapidly burst onto the market.
In just a few months, every car owner will have the opportunity to purchase a motor vehicle insurance policy without leaving home.
There is a huge number of quality products on the market, offered by reliable companies with a wide variety of customer-oriented services. However, unfortunately, at the same time, companies that provide specific services of the so-called tax arbitrage have not disappeared. The "sleeping beauties" that were once created for sale are still alive. The "financial pyramids" are doing well, allowing their owners to take three to four percent of the civilian car market in two or three years by dumping and leave in English, leaving their debts to "simpletons" in their opinion, who build a long-term business, forming the necessary reserves and attracting capital, constantly improving customer service. And we can also mention high commissions, dumping, and unfair competition.
And over the past three years, the state has done everything possible to ensure that these ugly phenomena of the past continue to undermine trust in such an important risk management tool for society and the economy as insurance. Truly like in the joke about a person who sets fire to a hundred-hryvnia bill to find five kopecks that were lost.
Probably, including that, for almost two years, deputies have been leading a goat around the presidential bill on the transfer of powers of the National Committee for Financial Services to the National Bank, the adoption of which would allow to significantly improve the situation in the insurance market in the shortest possible time.
Probably their own shirt is closer than the public interest?
But I believe that the critical mass of the need for reforms will soon exceed resistance.
– Is the current growth rate in our market an unambiguous evidence of its attractiveness for foreign investors? Or is the growth in volumes shown due to the growth of the hryvnia exchange rate?
– It is too early to talk about any attractiveness.
After the deep devaluation of 2014, the market fell three times, to the level of 2004, if measured in equivalent, for example, US dollars.
And now, the gradual recovery of lost positions has only just begun due to the revival of the economy.
– Can you give a brief forecast for the insurance market of Ukraine?
– This year we can expect an increase of 14%, and next year - 15%.
But at the same time, changes in the equivalent of US dollars. The USA will be much more modest due to the ongoing creeping weakening of the national currency and will amount to 7% respectively.
Unfortunately, according to this indicator, we are stuck somewhere between 2004 and 2005.
If there are no radical changes, we will be there for at least another three years.
– You often communicate with foreign colleagues. Has their attitude towards the Ukrainian insurance market changed in recent years?
– The attitude of reinsurers exactly follows the changes in our country. Some of them remain loyal to their regular clients, proven by the experience of long-term relationships. Some were frightened by our turbulence and lost interest, protecting themselves with a wall of extremely high tariffs. Some are cautious, watching the processes in our market from a distance. And there are those who are ready to take risks, counting on the prospect of further accelerated growth. It all depends on the risk appetite of the companies and their strategy.
– The regulator (National Commission of Financial Services) is constantly tightening requirements for insurance companies, but, as we can see, there are no special changes in the market. Why?
– First, the deputies took care of this, depriving the Commission of procedural independence. Today, in order to start an inspection, it is necessary to obtain the consent of the executive body. The Supervisory Body cannot refuse to create a knowingly insolvent insurer just because it has filed the required number of papers in the correct sequence. And if it refuses, the court will quickly "correct the misunderstanding". I'm not talking about depriving the license of an already insolvent insurer. And of course, the two-year wait for liquidation does not add enthusiasm to the employees of the Supervisory Body.
– The World Bank, IMF, EBRD, USAID and the EU Delegation to Ukraine have called on the Verkhovna Rada of Ukraine to complete consideration of the draft law No. 2413a on the consolidation of functions for state regulation of financial services markets (known as the “Law on Split”), which provides for the reorganization of the National Commission for Financial Services. What is your opinion on this?
– It is no secret that the insurers themselves have asked them to help stop this endless horror. Not all of them, of course, but those who still count on the prospect of professional work under uniform rules, and not in the absence of at least some rules. The Ukrainian Insurance Federation has repeatedly appealed not only to international organizations, but first of all - to the President of Ukraine, the Government and the Verkhovna Rada with a request to accelerate the adoption of the presidential draft law on split.
– How quickly can this happen? How much time will it take for everyone to start trusting the Ukrainian market?
– I don't want to be an oracle. There are no patterns in Ukrainian politics based on which one can build professional forecasts. But in the last month we have seen an intensification of work in the relevant Committee of the Verkhovna Rada. The NBU has also become significantly more active. There is a feeling that a decision is imminent.
– Trust will not appear under the Law.
– Years will pass before people forget the depreciated deposits of the State Insurance Company, the unreceived insurance compensations from the «pyramids» that have evaporated. But this process will go much faster if the state itself begins to trust the market it regulates, which is under its own supervision.
– What do you think about the creation of the Megaregulator?
– As for the next stage of institutional reform. None of the insurers has illusions about the split. Of course, it will be difficult for the NBU to pay the same attention to insurers as it does to banks. Mistakes are not excluded. But, at least, the movement will begin, the necessary resources, both human and material, will be attracted. Perhaps with a delay, but decisions will be made on the urgent problems of the insurance market. The state will finally stop pretending that it regulates and supervises it, and will start doing it for real. And after the decisions, the need for which has been accumulating for decades, it will be possible to think about further improving the system of regulation and supervision in the financial sector.
– Why can't insurers unite and come out with a single position, each of the three associations (LSOU, UFU, «Insurance Business» lobbying for its own interests? Wouldn't it be better to create one self-regulatory organization?
– I would like to remind you that even according to the Ukrainian government, the share of the shadow economy exceeds 40%. And, despite numerous state programs to combat this phenomenon, this share is consistently high. Is this a coincidence? Of course not. In Ukrainian society, in particular, in government bodies, there is an extensive network for its preservation and development.
It is not by chance that the state supervision and licensing system were destroyed, it is not by chance that a moratorium on inspections was introduced, it is not by chance that the simplified system cannot be modernized. Even the fugitive president, who usurped all formal power, failed to do this. And in addition to the black market, there is also a gray market. And deputies and officials are trying to "curate" the most delicious pieces of the markets, using association functionaries. Participants in the same market have different competitiveness, as well as different degrees of compliance with legal norms and the ability of shareholders to financially support their business. Therefore, not only in insurance, but also in almost every branch of the Ukrainian economy, there are several groups of entrepreneurs who apply radically different business models that are under the influence of different political and power groups, which is why there are many representatives of these groups or combinations of their associations. Therefore, a single association must appear in the insurance market without state intervention, after cleaning this market from insolvent companies and those companies that imitate insurance, pursuing other goals, as well as after cleaning the government from corruption. And cleaning the market in the current conditions is possible only after a split.
– How do you assess the activities of the Motor Bureau, in particular regarding the implementation of the Europrotocol and electronic policy?
– MTIBU has implemented the self-regulation model the closest to today. In the conditions of paralysis of state regulation and supervision, this allowed to save billions of clients' funds, which otherwise would have gone to satisfy the needs of the owners of pyramid companies. Acting contrary to, and not thanks to, insurers, although not without losses, are gradually freeing themselves from the corrupt influence of deputies and officials. Although in a somewhat perverted form of the Coordination Council, the powers of which are exercised solely by the National Financial Services Commission, a European model of interaction between the Bureau and the Supervisory Authority has been implemented, without intermediaries and intermediaries.
As a result, at the initiative of both the Bureau and the National Financial Services Commission, many reforms have been implemented in the civil motor vehicle market, including those you mentioned.
– What do you think of the regulator's loud actions to check the deadlines for submitting information about the OSCV policies by members of the Bureau?
– I consider this a misunderstanding. The result of all the same actions is the collapse of the state supervision system in Ukraine in favor of operators of the shadow and gray economy, embodied in the laws on state supervision and licensing. No one in the market has any objections to the need to fill the MTIBU database on policies and compensation as quickly as possible. At one time, insurers themselves initiated the introduction of appropriate sanctions. But one cannot ignore the fact that due to the underdevelopment of the data transmission and transport infrastructure in the regions, it is impossible to ensure one hundred percent timely entry of information. I am not talking about force majeure situations associated with power outages in hundreds of settlements due to accidents and natural disasters. The adoption of the first edition of the Regulation on the DBD with a two-day deadline was combined with the adoption of the Licensing Conditions for civilian vehicles, which provides for the need for the MTIBU to apply to the National Commission for Financial Services to establish a violation of the Licensing Conditions. After the adoption of the Law on Dispensation and the Resolution of the Cabinet of Ministers of Ukraine on General Licensing Conditions, as well as after the abolition of special Licensing Conditions for civilian vehicles, new circumstances arose that allow the Supervisory Authority to act independently and formally, which they immediately took advantage of.
Today, a new draft of amendments to the Regulation on the Central Bank of Ukraine was published, in which the problem must be resolved, based on the fact that a regulatory act cannot contain a requirement that cannot be fulfilled and for failure to fulfill which, sanctions may follow in the form of deprivation of licenses.
– How does your Company plan to organize its work regarding the State Health Insurance Fund, in connection with the adoption of the Law on Medical Reform?
– Today, for the first time, a real step has been taken towards the emergence of non-selective demand for the VMS service in Ukraine from individuals, and not only corporate clients.
Therefore, we intend to actively participate in the process of implementing this law and be ready to provide millions of our clients with quality service.
– How do you assess the company's position based on the results of 2016 and 2017?
– The company, as before, remains No. 1 in the motor insurance market and is even strengthening its leadership position, gradually and cautiously increasing its share in the Green Card and CASCO. We are actively improving the settlement system, product line, which ensures a breakthrough in other types. Currently, the Company concludes 7,500 insurance contracts per day and pays out over 500 thousand hryvnias. The average settlement period for motor insurance has been significantly reduced below the average market level, and under We pay out CASCO insurance on average in less than two weeks. As an example, I will give payments to more than two hundred victims of the explosions in Kalynivka in the first month after the event.
– And the last question, what are your wishes for the readers of the anniversary issue of the magazine, in the creation of which you participated and remain a permanent author?
– I would like to wish the readers, among whom there are many professional participants in the insurance market, to wait for news not only about the start of real reforms in the insurance market, but also about their success much earlier than the release of the next anniversary issue of your magazine!
Source: Ukrainian Insurance Federation
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