Boom of recent years investment life insurance can turn on the horizon two or three years, a shock to the insurance market, according to the rating Agency of ACRE. “In the next two or three years, at first might be the risk of disappointment of policyholders with the results of the investment of life insurance”, — stated in the review “the Russian market of insurance” (at the disposal).
The Agency points out that the sale of this rather complex structural investment product insurers and banks have used aggressive sales techniques. “The return of the invested amount is guaranteed, but it is clear that the insurer expects revenues of more than usual interest on deposits. The Commission of the mediators constituting a significant share of the award, has a negative impact on the final result,” the authors of the study.
“In practice, this means that you get the desired, customers will reduce the demand for this product, and the drop in sales, in turn, is fraught with reduction in benefits and an increase of dissatisfaction with the product,” — said a source in the insurance market.
What is investment insurance
In contrast to the classical insurance investment insurance is a tool that provides to the client in addition to direct insurance a potentially high return on investment with a guarantee of safety of financial investments. In the programs investment life insurance amount of money invested by the client is divided into two funds: the guarantee and investment (risk). From the first returns the value of the investment, the second provides the potential return.
Life insurance for several years is the most dynamic segment of Russian insurance market. The decline in yield on deposits of banks and insurers intensified in 2016, the sale of this product. In the end, life insurance in 2016 increased by 66.3% vs. 19.5% in 2015. The share of premiums on investment life insurance accounted for 60-70% of premiums in the life insurance segment, calculated in ACRES (in 2015, this share did not exceed half). Absolute values in ACRE did not disclose.
At the same time the entire insurance market in the period increased by 15.3% and the highest rate among other types of insurance for individuals increased insurance, premiums in this segment increased by only 7.2%.
Photo: Alexander Ryumin / TASS
The growth of risks in the life insurance segment in the next few years due to the start of active sales of this product and the average duration of such insurance, says the insurance market participants.
As the Director of group of ratings of financial institutions of an ACRE Alexey Bredikhin, the Agency fears that in the next two to three years will be to end the policies issued in the boom period of the investment life insurance, and customers may be disappointed by the expectations of profitability from this product. “Product is risky, but there are concerns that its users do not know about it. Their dissatisfaction can result in numerous lawsuits and negative to the investment type of insurance and the General insurance market,” he said. The expert reminded that the courts are already massively up on the side of the consumer in motor insurance, which has been hit hard in this segment.
The growth of the market for investment insurance already started to slow down. ACRE expects that in the years 2017-2019, this market will grow by 24.8 and 22.3 and 21.6%, respectively. “The unfavorable development of the above systemic risks may exert considerable pressure on the credit profiles of individual insurers”, — the ACRE.
Market participants, respondents as a whole share the concerns of analysts of the rating Agency. The main reason, according to them, incorrect positioning of the product. As pointed out by the Deputy General Director “alpha insurance-life” Yuri Gruzinov, the risk of disappointment of policyholders with the results of the investment of life insurance is in the case that was unfair sale. “Often when selling coli this product is compared with the deposits, while it would be more correct to compare it with mutual Funds, because it is a tool to protect capital,” he said.
“In General, the market, the problem of poor sales of any investment products is always possible, if there is no clear product standards and standards of disclosure to the client. Customer evaluation of products in a coli, the market will get in the next year or two, when policies are purchased on a peak stage of market development,” — said the head of “wealth Management” Sberbank Maxim Chernin.
He adds that customers “Sberbank life insurance” is warned that this is an investment, long-term product without a guaranteed return. This information is part of the approach to sales, and in addition, after the sale, the customer receives a call from our call center with questions on understanding the product. If something went wrong, the customer is entitled to withdraw from the contract within two weeks without any financial losses, he says.
Managing partner National financial research Agency Pavel Samiev also notes that while the profitability of the investment policies of life insurance is higher than the average of deposits and without sharp changes in market conditions, the situation may remain the same this year. “The market last year was successful, and as long as the proportion of terminations of contracts less than 10%, I don’t see anything dramatic”, he added. However, over the long term, which tells of an ACRE, market forecasts do not apply.
The Bank of Russia acknowledged the risks, but note that “today” they are insignificant. Thus in a press-service of the regulator said that the risk of a shortfall in investment income in the case of a coli is borne by the policyholder. In this regard, it is possible that customers of the insurers, getting everyone what they are owed according to the agreement coli, remain unhappy with the low final yield of its investments, agree the Central Bank with the view of ACRE. That is why the Bank of Russia believes that insurance companies should pay more attention to informing customers about purchased services.
The controller is ready to take concrete steps to that effect. “Basic requirements for disclosure to clients of information about the key parameters of insurance programs and the possible risks will be incorporated into the base standard for the protection of the rights of consumers, the SRO of insurers, is scheduled for approval later this year”, — said the press service of the Bank of Russia.