Life insurance: the secret of success

 Life insurance: the secret of success

At the end of 2016, the life insurance market showed an unexpected growth of 66%, despite the fact that the heads of Russian insurance companies a year earlier predicted the growth of this segment by only 10%1

Premium collections in the life insurance segment in 2016 amounted to a record 216 billion rubles, and insurance company executives believe that the market has not yet reached its limit. A survey conducted by the international auditing and consulting company KPMG showed that representatives of the largest insurance companies believe that life insurance will grow by another 28% in 2017, and, according to half of the respondents, high growth rates (about 30%) will continue for another two or three years. of the year.

The Russian life insurance market can be divided into three main segments: credit insurance, investment life insurance (LIS), and endowment life insurance (LIS), the share of which, according to Expert RA, in 2016 was 17% (credit insurance), 58% (ISZH) and 25% (NSZH). However, three years ago, the main product was credit insurance, which occupied 55% of the market, and ILI products were just starting their development path, their share was 8%.

ILI products, which banks have been selling as an alternative to deposits, have been the main growth driver for the life insurance market over the past two years. High commission income is a powerful selling motivator for banks looking for a transactional (risk-free) component to their profits. As a result, the banking channel in 2016 provided 84% of sales of life insurance policies. According to forecasts, in 2017 the share of banks in the structure of sales of life insurance products may grow to 89%, absorbing the rest of the traditional channels.

Even though ILI products are more complex both in terms of sales and product management (insurers are required to provide guaranteed returns), they have shown strong double-digit growth over the past five years. These classic products are consistently contributing to the development of the life insurance market, and a number of insurers are betting on this particular product in the near future.

Although according to a KPMG survey, insurance company leaders are confident that the life insurance market will continue to grow for another two to three years, experts are ambivalent about the prospects for ILI products in their current form in terms of their future attractiveness. According to KPMG, in the medium term, the life insurance will increase at a faster pace, and the future of life insurance is not so rosy, especially since the payment period for the first series of life insurance policies is expected in 2017-2018 — then it will be possible to judge the real profitability of the product for policyholders.

On the other hand, if the received actual profitability of ILI meets the expectations of insurers, then this will become an impetus for further development of the market. In addition, the public may turn to the life insurance market in search of investment opportunities, as these opportunities are dwindling in the banking sector.

Another factor that can influence the development of the life insurance market can be new technologies, which, according to 90% of respondents to the survey conducted by KPMG, will contribute to the profitable growth of the entire insurance industry. Western insurance practice shows successful examples of the use of physical activity trackers (fitness bracelets) in conjunction with mobile applications of insurance companies for selling policies and monitoring the health of the insured (underwriting). In addition, such new technologies make it easier to claim claims, receive medical advice for the insured, increase the level of policyholder loyalty, etc. According to KPMG, the Russian insurance market will also soon need to switch to new technologies, and those players who can integrate insure-tech into their business processes as smoothly as possible will gain a competitive advantage.