The Bank of Russia is concerned about the customer value of insurance – the head of the Central Bank Elvira Nabiullina said on Wednesday that the level of payments for certain types of insurance is “critically low” – from 1% to 10% of the amount of fees. The regulator analyzed foreign statistics and found that insurers pay more to customers in other countries. The insurance market explains that the point is not in the greed of insurers, but in the appetites of intermediaries: the opportunity to “get on the shelf” in the bank for insurers costs up to 80-90% of the cost of the policy.
In a speech at the International Financial Congress, Elvira Nabiullina stated that “not all financial products on the market today meet the consumer value criterion,” and cited insurance as an example. According to the regulator, in 2020 the level of payments in relation to the accrued premiums for certain types was critically low: in life and health insurance for mortgage borrowers – 10%; for people who have taken out a car loan or a consumer loan – no more than 5%. “An extremely low level of payments is also observed in the insurance of bank cards and mobile equipment – 4% and 1%, respectively. We looked at examples in other countries, where the level of payments is several times higher, ”said the head of the regulator. Then I asked myself a question: why do we need such insurance at all, “why should people pay for them”?
Therefore, the Central Bank intends to increase the client value of the policies and has already outlined a number of actions: this is strengthening the requirements for information disclosure (insurers will have to better explain the conditions for receiving payments) and tracking “the compliance of the insured event with those life situations that actually arise in practice.”
Note that this is not the first time that the Central Bank has taken up arms against low payments to companies. In February, the regulator audited 45 imputed types of insurance and found there a level of payments of 17% of the volume of premiums, which is extremely small compared to compulsory types (69% of them, see Kommersant of February 20). In the spring, the Central Bank pointed to a low share of payments in insurance products against COVID-19 – 16% of fees (see Kommersant on April 26).
“We fully support and share the position of the Bank of Russia regarding the need to simplify and increase the transparency of the procedures for concluding contracts and receiving payments,” says Igor Yurgens, President of the All-Russian Union of Insurers.
Alexei Bredikhin, head of the ACRA Financial Institutions Ratings Group, notes that, in fact, the price of a policy is determined not by the size of the insurance risk, but by the appetites of intermediaries, the overwhelming part of the premium is spent on paying commissions, and consumers are forced to buy insurance in order to get a loan. According to him, in the UK there was a similar situation – after an investigation, the regulator heavily fined banks and companies for such practices.
The Central Bank analyzed the practice of incorrect sales of policies to borrowers
As the interlocutor of Kommersant in the insurance market told, the most systemic sales channel, for which the insurers are fighting, is the banking one. “Getting on the shelf of a bank, as well as getting the opportunity to sell packaged products through mobile shops or other structures (which may include an insurance service in another, more in demand) is the dream of every insurer,” he says. “All other channels (brokers, dealers , own branches, agent networks) are not rejected, but they are complex, costly to build and require internal infrastructure. ”
“If we compare the profitability of products sold through different sales channels, it will be almost the same. From the point of view of the combined loss ratio, there is also no difference: add up the commission of the intermediary, the administrative costs of the insurer, losses and reserves – and the value will be the same everywhere. Therefore, it was more correct to take the amount of the net premium (risk) and compare it with the level of payments. But with this option, it will be necessary to show the real value of the cost of attracting business through a banking channel, and no one wants that, ”he explained to Kommersant.
According to the Central Bank, according to the results of the first quarter of 2021, the amount of commission fees paid to banks amounted to 62.3 billion rubles, and the total fees through them – 151.2 billion rubles. On average, banks’ commission was 41.2%. At the same time, banks received 12.1 billion rubles for credit insurance against accidents. remuneration, and they collected 20.2 billion rubles, that is, their commission amounted to 60% of the premiums collected through them. Informal commissions are even higher – up to 90%, these can be bank commissions for the maintenance of contracts.