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29.12.2017
2413
The insurance market is slowly recovering from the crisis. At first glance, everything is in order in the market. According to the National Committee of Financial Services, insurers' gross premiums for 3 quarters increased by more than a quarter, or by UAH 6 billion. Volumes are increasing for almost all types of insurance - from financial risks to medicine. Companies have also started paying more to their clients - over 9 months, the growth rate of payments exceeded 17% (or UAH 1.1 billion).
But upon closer examination, the picture is not so optimistic. Insurers admit that at least half of the market - are pseudo-insurance schemes. Clients, as before, actively use companies to optimize taxes. The growth in real insurance volumes is much smaller, only a few percent.
In 2017, 27 companies left the market, but even after that, it is quite crowded here: as of October 1, 262 risk insurers and 34 life insurance companies remained under the supervision of the National Commission for Financial Services. Approximately half of them are — «dead» souls that practically do not conduct business.
«Ministry of Finance» asked experts whether the insurance market could change in 2018 and what is needed for this.
The insurance sector has been at a bifurcation point for almost three years, and therefore there are at least two development scenarios. They depend on whether there will finally be any steps towards implementing the Comprehensive Program for the Development of the Financial Sector of Ukraine until 2020, adopted 2.5 years ago.
1st (will be implemented in the absence of reforms): — The sector will continue NOMINAL growth, in particular due to an increase in the number of domestic reinsurance.
At the same time, the REAL growth of the classic sector of the so-called DIRECT operations of the insurer (without tax arbitrage operations) will be slow and will repeat the GDP growth indicators.
2nd (will be implemented if the Comprehensive Program, approved 2.5 years ago, finally works): — gross income indicators will finally fall due to a catastrophic decrease in tax optimization operations, the share of which has not decreased yet.
Currently, 48-52% of the market — are tax optimization operations. This part (about 20 billion UAH) — may «catastrophically» fall to «0» if the authorities block this channel. Then the development scenario for next year — This is a decline in the income of the insurance sector, BUT NOT real (classical) insurance. Because classic insurance in 2018 will grow at the same pace as GDP growth.
Both scenarios — REALISTIC! The choice is up to the authorities. Which way will we go?
But in 2019, we can expect a STORMFUL development of the classic sector (+10% before inflation) if the following steps are taken: 1. Disclosure of the ultimate owners of insurers. 2. Disclosure of information FOR EACH insurer and expansion of information requirements. 3. Creating barriers and obstacles to using the insurance sector for the shadow (informal) economy.
To stimulate the development of the insurance market in 2018, the National Commission for Financial Services will accompany the adoption by the Verkhovna Rada of Ukraine of a number of draft laws. For example, "On the Fund for Guaranteeing Insurance Payments under Life Insurance Contracts", "On Insurance" (No. 1797-1), "On Compulsory Civil Liability Insurance of Owners of Land Vehicles" (No. 3670) and a number of others. The draft law "On Amendments to Certain Legislative Acts of Ukraine on Travel Insurance" is also under development.
This year, the commission has already approved a number of acts regulating the implementation of electronic OSACV policies. In 2018, the National Commission for Financial Services also plans to adopt a new version of the Regulation on a Single Centralized Database on Motor Vehicle Insurance. In addition, it will be necessary to adopt corrective coefficients for electric vehicles.
Given that a number of insurance companies have recently left the market "in English" without saying goodbye, it is necessary to make changes to the legislation to increase the responsibility of managers and owners of non-banking financial institutions.
In 2018, the insurance market expects a new version of the Regulation on the State Register of Financial Institutions and a change in the licensing procedure for insurance companies. They will be aimed at simplifying the procedure for entering the market, increasing the requirements for the business reputation of managers, chief accountants, owners of significant participation, etc. The Commission also intends to improve the quality of insurer audits.
To improve the transparency of the insurance market, it is planned to amend the provisions on disclosure of information in the publicly available information database on financial institutions and on websites.
In addition, a financial reporting system should be launched in 2019, which will allow for the reception, processing, verification and disclosure of financial statements of enterprises in a single format based on the XBRL standard (eXtensible Business Reporting Language). The introduction of international reporting standards will be a significant step towards increasing the transparency of the insurance market and its integration into the European and global financial services markets.
According to forecasts, in 2017, the total premium collections of the real market will amount to about UAH 23.5 billion. The lion's share will fall on risk types of insurance - UAH 20.5 billion, and on life insurance - about UAH 3 billion.
In the draft laws on medical and pension reforms that have been adopted or are still being discussed, there is practically no place for insurance companies. This means that one should not expect rapid development of the insurance market in the coming years. The dynamics of collected premiums will correlate with the dynamics of GDP, as it has been in the last 10-15 years. Therefore, we are unlikely to see significant investments from both domestic and foreign investors. In the next 3-5 years, the development resource of existing insurance companies will be their own funds.
Agriculture, energy, mechanical engineering - these are the main drivers that will ensure the growth of insurance market premiums in 2018. The medical reform, despite the fact that it does not provide for the direct participation of insurance companies, will ensure greater interest in voluntary medical insurance.
The market will also grow due to motor insurance. We expect that in 2018, sales of new cars will increase by 15-20%. Leasing companies are starting to work more actively, and this trend will only intensify next year.
In the same period, the most significant factor of influence will be "digitalization". Already now, a number of insurance companies, including INGO Ukraine, are implementing projects to modernize the operating environment based on digital technologies and are trying to bring new products with a large technological and service component to the market. This means that very soon new technologies may change the perception of insurance services.
According to official data from the regulator, gross insurance payments increased by almost 30% in the first 9 months of 2017. But if we look at the net premiums indicator (minus domestic reinsurance), the volumes increased by only a little more than 6% with double-digit inflation. Therefore, it is not yet necessary to talk about a quick recovery of the market.
I would highlight three key events of 2017. This is, firstly, the consolidation of all life insurance companies into a single project, on the UFU platform. For the first time in history, companies began to develop a common policy. Secondly, the successful launch of direct settlement. This project is still in pilot mode. But it has shown its potential and effectiveness. It is important to ensure that the entire market begins to use direct settlement.
The third event is with a negative connotation. This is the slippage of the issue of pricing in MTPL. We are faced with a problem that lies more in the political plane than in economics and common sense. Prices need to be increased, but the regulator is delaying this decision. This leads to the fact that responsible players are leaving the market, since they are not ready to participate in a loss-making type. Instead, an increasing share will be occupied by companies that may soon become bankrupt.
The growth of the classical market in 2018 is expected to be 15%, and only a little will cover the inflation expected next year. The main drivers will be auto insurance, health insurance. There are positive expectations for the life insurance market.
Source: Ministry of Finance
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