RUSSIA: insurers' expense ratio in 2020 hits a record of 43%

16 March 2021 —
In 2020, the loss ratio of Russian insurers remained stable, and the combined loss ratio during the year remained almost unchanged, amounting to 90%, according to the Central Bank's review.

At the same time, the share of business expenses in the structure of the combined loss ratio increased due to an increase in the remuneration of intermediaries, which generate the largest part of the insurers' GWP. At that insurers remain highly dependent on credit institutions, which have the highest share of remuneration among intermediaries.

Although the loss ratio remained stable, the insurers' expense ratio jumped to 43%, the record annual value for the entire observation period. Experts note that growth of the expense ratio was influenced by the growth of remuneration of insurance intermediaries, which is more than half of total expenses of insurers. The amount of remuneration of intermediaries from the premiums received with their participation in 2020 amounted to 30% (+0.5 p.p.).

The biggest part of the remuneration falls on credit insurance (against accidents and illnesses) and life insurance of borrowers, which together provide about half of the total amount of intermediaries' remuneration. This is followed by Motor Hull and insurance of other property of individuals (approximately 25% of the remuneration).

Intermediaries remain the main sales channel for insurance products. High remuneration to intermediaries allows insurers to increase GWP volume in profitable types of insurance - the combined loss ratio for insurance of accidents and illnesses in 2020 was 72.2%, in Motor Hull - 81.8% - even with high remuneration to intermediaries, insurers make a profit in such types of insurance.