BOFIT Viikkokatsaus / BOFIT Weekly 2019/16

The Central Bank of Russia reports that in 2018 Russians paid a total of 1.48 trillion rubles (20 billion euros) for various types insurance (excluding mandatory insurance policies for healthcare and pensions), which works out to about 10,000 rubles (140 euros) per capita. The insurance market saw nominal overall growth of 16 % between 2017 and 2018. Growth has been rapid even if we take into account inflation of about 5 % a year. Even so, Russia’s insurance market is still rather small relative to most advanced economies.

About 30 % of insurance payments go to life insurance. Health, accident and prescription drug insurance account for another 20 % combined, while car insurance is about 30 %. The rise of life insurance in recent years has made up for the downturn in premia paid on other types of policies (though other insurance categories also grew last year). Russia’s pension system and healthcare system are funded through mandatory contributions, so the role of private insurance is supplemental. Private life insurance policies represent a small share of pension insurance, and only a small slice of the Russian population purchases supplemental health insurance.

Life insurance has been the strongest growth category in the insurance sector. During 2016 and 2017, the total amount of life insurance premia collected increased at a pace of over 50 % a year, and last year grew by yet another 30 %. The central bank, which is responsible for supervision of Russia’s financial markets, also intervened this year to regulate the life insurance business. New guidance that entered into force this month requires insurance companies to better inform their clients of the terms of life insurance policies and ensure that the policies fit the needs of their clients. The Central Bank pays special attention to the clarity of payout conditions and amounts.

At the end of 2018, there were 275 companies operating in Russia’s insurance markets. About 200 were companies, 12 mutual insurance groups and the rest insurance brokers. The number of operating licences declined, but the drop was due more to voluntary relinquishing of operating licences than official action. In contrast, the Central Bank has had few qualms about revoking banking licences lately. It has been responsible for oversight of insurance companies since 2014.