After years of chronic problems, MTPL has become the most unprofitable segment of the Russian insurance market

Gross premiums written by the Russian insurers amounted to RUB 987.8 billion, 9.16% up in nominal terms as compared with 2013, a result which given the 11.36% y-o-y inflation rate recorded by the end of December, means in fact an about 2% decrease in real terms. Motor insurance lines, which represent about 42.4% of the non-life GWP, but generate about 57% of the overall non-life claims expenses, saw mixed results:
  • Motor Hull premiums (22% of the market GWP portfolio) nominally increased by about 3%, while claims paid went up by about 10%;
  • The voluntary MTPL line saw a 7.9% nominal decrease in premiums (13.27% decrease for the green card insurance line) while claims went up all in all by about 42%; the class which in 2012 represented 1% of the market portfolio, ended 2014 with a 0.75% share of the total GWP;
  • The mandatory MTPL line, representing 15.3% of the market GWP recorded a 12.4% nominal increase in premiums, while claims paid augmented by 19%.
The visible decreasing demand for the voluntary motor insurance products - in part determined by the falling vehicle sales figures (about 300 thousand units less in 2014 as compared with the previous year), as well as the imbalances of MTPL business, have strongly affected the motor insurance segment which remains maybe the most challenging business line of the Russian market.

By the end of 2013 and 2014 MTPL has become one of the most unprofitable segments for insurance companies after accumulating for years a series of chronic problems. A decade of unchanged tariffs despite the cumulative inflation and currency rate depreciation, led to a huge growth of the loss ratio, especially in some regions, and as a result, motor insurance dragged down the overall performance, not only of local insurers but foreign companies too. In response to this situation, one after another, foreign insurance companies that operate on the Russian insurance market decided to give up their retail business, especially in regions with a high loss ratio on MTPL insurance and this kind of insurance became almost unavailable in these areas. Moreover, after the Supreme Court's decision to apply the Law on the Consumer Rights' Protection provisions to the MTPL sector, the relationship between insurers and the MTPL clients began to worsen, causing also a sharp increase in the cost of insurers for penalties for losing litigation.

In this context, the long awaited implementation of a major reform of MTPL insurance began at the end of 2014, providing for significantly increased limits of insurance payments and the implementation of very important changes in the whole system, which are believed to bring a gradual improvement of the MTPL market status.

Motor Hull business on the other hand is strongly feeling the influence of the worsening economic situation of the country, being confronted with the decreasing purchasing power of the customers and the sharply falling of cars sales (down about 300 thousand units in 2014). In 2014, gross written premiums on Motor Hull insurance increased only by 2.94% compared to the year 2013, while paid claims reached 10.25%.

A comprehensive analysis of the Russian motor insurance market, as well as of the other main business lines, is available in the recently launched report "XPRIMM Insurance Profile RUSSIA FY2014".

Click here to pre order a copy.

Follow XPRIMM Publications on LinkedIn, for more data on the insurance and financial industry.

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