Alexander Gurdus Director of OAO ROSNO Underwriting and Products for Natural Persons and Small-scale Business Management Center
– Direct loss settlement and ‘European Protocol’ introduced in March became important events for the MTPL market. It should mentioned that the leading insurers are ‘morally’ ready for direct settlement. However, for creation of consistent methodological procedures, development and adjustment a general principle of innovation realization it is necessary to make major efforts.
Being aware that direct settlement is popular in the world and simplifies the clients’ life, we two years ago became the first Russia’s company to offer insurants taken into a road accident to directly apply to ROSNO. Our clients could purchase an additional ‘Euroservice’ policy, providing a possibility to avoid applying to ‘some else’s’ insurers, for a token price. That is why our company is ready to work with this innovation even at the initial stage.
However, it is, of course, important for all members of the process to be ready to employ this system to provide its effective work. It would be naïve to think that under the introduced significant changes in the road regulations and relative innovations in road accident formalization it will be possible to receive MTPL indemnity payment without any problems.
The said problems can be divided into several groups. The first one is related to the fact that it is not easy for everyone to draw any documents after an accident under the stress condition. That is why we expect that despite the fact that MTPL formsheets for an accident record are rather clear to fill in, a greater part of them will be executed with errors and discrepancies, which will complicate the process of decision making on an insured event.
The second group of problems includes those concerning growth in cheating, which can certainly have a significant influence on the gross loss rate of this kind of insurance with no third-party.
The third group of problems is related to the absence of a general list of defects, which could provide insurance companies with common principles for indemnity volume assessment. I also think that the process of clearing payments between insurance companies will bring about certain difficulties concerning presence of financially unreliable market players.
Change in territorial coefficients was another important event for the insurance companies. Before the new Provision was adopted there were territorial coefficients, introduced in 2003 with the absence of actual regional statistics. They were calculated on the basis of data about density of population, number of vehicles and a range of other parameters in different regions. As it turned out, those indices were not very adequate for loss rate evaluation, that is why the new coefficients were calculated on the basis of actual loss statistics.
After change in correction coefficients the base cost of a policy remains at the same level. For drivers living in Moscow territorial coefficients remained unchangeable. But coefficients for certain groups of drivers and kinds of vehicles change. So forth, dependently on experience and age of a driver, and on a vehicle’s capacity, coefficients can increase or decrease. For instance, for an experienced driver of a more powerful vehicle insurance will cost lower. And for an inexperienced driver price of insurance will increase, as experience and age coefficients will raise, which also reflect actual loss statistics for this group of drivers.
Upon the whole, by the RF Ministry of Finance estimate, correction of territorial coefficients and other changes will provide financial support of the MTPL market stability and growth in the total volume of MTPL premium by 10-15 %. But it can be also supposed, that decisions made on changes in a number of coefficients will help to only partially balance loss rate in the entire market, decreasing it in certain critical segments, but they will not lead to dramatic change of the situation.
An issue concerning a possibility for insurers to decrease price for policies has been actively discussed lately. Speaking about price liberalization upon the whole it should be noted that this tendency is certainly promising. however, a situation when a company can reduce price to attract clients, but can not increase it does not stimulate responsible behavior of insurers. Actually liberalized tariffs should be determined by a certain insurance company on the basis of real statistics and portfolio stability analysis.
An idea of price liberalization can be effective and bring about fair prices under the certain condition of the gross MTPL market portfolio having a significant profit supply. Under the current market condition with MTPL on the critical brink of loss rate, this measure looks like support of unreliable market members with their debts to be paid by honest insurance companies.
Today base tariffs need to be corrected. For instance, in European countries price for MTPL policy is comparable to price for CNC (comprehensive and collision insurance) policy, which provides high quality of service, grade repair without regard to wear etc.
Moreover, in the background of weakness in the exchange-value of rouble and with regard to inflation changes in other insurance products also take place. In particular, price for the international ‘Green Card’ insurance increased. The new tariffs has already been approved by the RF Ministry of Finance and are obligatory to be applied since March 16, 2009.
Under the new tariffs a policy for a minimal 15-day trip by car to any country, which is a member of ‘Green Card’ is available for 1,670 roubles against the former 1,288 roubles. An annual policy for a trip to any country on ‘Green Card’ can be executed for 15,140 roubles against the former 11,705 roubles. A policy for a 15-day trip by car to Ukraine, Belarus and Moldova costs 570 roubles (against 440 roubles), the price for an annual policy to these countries amounts to 3,790 roubles (against 2,930 roubles). It should be noted that tariffs of Russia’s insurers are approximately at the level of mid-market tariffs of foreign insurance companies.
As for results of our company in 2008, ROSNO actively developed the MTPL segment. We optimized procedures in the field of loss settlement and reduced its time schedule. We also worked with partners on loss settlement in order to increase quality of service.
Speaking about prognoses, I suppose, loss rate will increase by 15-20 %. Today more than 800 companies operate in the insurance sector. According to estimates by different experts, during 2009 30-50 companies are likely to leave the market. Pursuant to more pessimistic prediction, this index can reach the level of 150-170 organizations.
Evidently, the first will be small companies, captive players and companies with significant shift towards MTPL or its lossmaking part. Objectively speaking, it would not be a great loss for the market, and, moreover, a kind of sanation.
I agree with estimates by some experts, that in 2-3 years in Russia rather a stable and strong insurance market will form, with 200-300 players, having wisely organized reserves, realizing correct strategies etc.
The leading ‘dub’ is likely to raise about 70-80 % market premiums. This structure of the market looks rather real. The crisis hastens the process of unreliable players’ outgoing.
