Although 2022 was a difficult year for the whole of Ukraine and for the insurance industry, it did not become a verdict – the industry survived, insurance did not disappear, insurers generally have a slight decline by 2021, and some even have a very good increase.
This was written by Vyacheslav Havrylenko, CEO of ARX Life Insurance Company, Deputy Chairman of the Board of ARX, in a column published by Interfax-Ukraine.
Risk insurance market
In numbers, in 2022, the market fell by about 11% compared to the previous year, which is very good in a time of war. If we look at the market without the Green Card, the drop will be 17%, which is also a satisfactory result. These are preliminary data based on information from members of the National Insurance Association of Ukraine.
The Green Card has become the leader in insurance, with growth of 152% (due to the massive departure of Ukrainians abroad, especially at the beginning of the war). The volume of premiums was stable, with only a slight drop of 3%. Health insurance fell by 16%. The biggest drop was in hull insurance – 20% year-on-year.
Travel insurance grew by almost 42%. Property insurance (in the corporate segment) was also a surprise – our premiums fell by only 25%, although we did not expect such a moderate drop. One of the reasons is that global insurance programs have largely disappeared and customers have turned to local insurers. The market benefited from this.
If we describe the behavior of customers, we can say that although the demand has dropped (due to financial difficulties, the inability to insure at all in parts of Ukraine, the catastrophic drop in new car sales and the drop in car loans), it has not disappeared at all – customers felt the need for insurance. Ordinary insured events have not disappeared, and insurers compensate customers for their losses. In 2022, ARX paid UAH 826 million in indemnities, and we continue to make payments under the contracts of the previous year.
Life insurance
Regarding the life market, we can state that, just like in non-life, the market withstood in 2022. At the same time, the total premiums of all life companies in general showed a 14% decrease compared to the previous year. Some companies experienced a bigger drop, but some showed a slight increase. The composition of the main players has not changed over the past year.
While overall there was a moderate drop in payment volumes, in the non-lending individual insurance segment, we even grew by 5% compared to 2021.
Corporate insurance showed an increase of 10%. As for clients, our portfolio amounted to more than 430 thousand clients in 2022. Unfortunately, this is a clear decline in the total number of clients compared to the previous year. Therefore, we are focused on retaining customers and focus on reliable and high-quality service – we take care of our partners and customers every day.
We ended last year with a profit of UAH 25 million, which is more than 2 times higher than in 2021. As for payments, we collected almost UAH 270 million, which, unfortunately, means a 16% decrease in payments in general compared to the total fees of the previous year.
But overall, we are optimistic about the future. For example, in 2022, we launched a new product called “Armor Protection”, which is accident insurance that includes military risks. So it’s definitely not time to stop.
What to expect in 2023
Regarding plans for 2023, it is clear that it is impossible to predict how the situation with the war and the economy will develop (although we are optimistic), but we must plan our activities. So we will try to achieve a year-on-year growth of 22% to 23%.
Of course, these are average figures, and they will differ for different types of insurance, sales channels and regions of Ukraine. Perhaps this is a somewhat ambitious plan, but we see it as such. We will see what happens in reality; in January we fulfilled our plan.
We do not foresee a significant increase in new car sales this year and do not forecast a significant increase in the share of car loans in these sales. Therefore, we continue to focus our sales on car insurance without loans, including used car insurance – it is clear that these will be not only full hull insurance programs. In particular, we continue to actively develop online sales and hybrid sales (transfer of online leads to sales offices and call centers). We are also actively working with cross-selling to MTPL customers, but the main resource for many companies will be the renewal and retention of their own base of existing customers.
Therefore, we will continue to focus on high quality of service, development of additional in-house services, and will prove our main advantage – true fundamental reliability.
Against the backdrop of the war, falling demand, and financial difficulties, the NBU continues its systematic and systematic work to oversee companies’ compliance with financial standards. So, all together, all insurers are pushing all insurers to work profitably (otherwise there will be a lack of capital) and form reserves with the proper assets, but at the same time constantly improve the quality of their services and not try to achieve profitability by “cutting” justified payments to customers; continue to move further into digitalization, but reduce operating costs.
Undoubtedly, some companies will leave the market due to the factors described above, but almost all large companies with Ukrainian capital and all international companies will remain in the market. In general, customers will benefit because the reliability of insurers and the quality of their services are increasing.
One insurance company voluntarily left the Ukrainian insurance market in November 2022 and six more insurers – compulsorily, with one insurance broker included in the register, according to the website of the National Bank of Ukraine (NBU).
Overall, the number of participants in the non-banking financial market in November decreased from 1572 (as of October 31) to 1522 (as of November 30).
As of November 30, there were 117 non-life insurers (there were 124 in October) and 13 life insurers (the number remained unchanged), 187 pawnshops (190), 166 credit unions (173), 806 financial companies (839), 63 insurance brokers (62) and 67 collection companies (the number remained unchanged).
The NBU also notes that 21 financial companies, one insurer, one pawnshop and six credit unions had their licenses revoked voluntarily (on the basis of applications submitted by them) and 17 financial companies, seven insurers and three pawnshops had their licenses revoked involuntarily (as a coercive measure).
In addition, six financial companies had part of their licenses revoked voluntarily, and five financial companies and one insurer had part of their licenses revoked involuntarily.
In November, the licenses of three financial companies and one leasing company were suspended. At the same time, licenses have been renewed for 15 financial companies and six pawnshops.
The number of banks has not changed and amounts to 67.
In addition, 24 banking groups and 23 non-banking financial groups are recognized in the market.
There are 38 national payment systems, including the state ones, and 16 international payment systems are operating in the payment market.
In November, the NBU received 403 registration and license applications from the market participants. The number of requests on financial companies, pawnshops and lessors was 267. The number of requests on credit institutions (banks and credit unions) was 53, on insurers – 74, on payment institutions – nine.
Since the beginning of the Russian military aggression in Ukraine, the insurance market of Ukraine has decreased by five participants in the non-life segment, Yulia Khristolyubskaya, deputy head of the department for supervision of insurance companies of the National Bank of Ukraine, said at a meeting with insurance market participants on Thursday.
According to her, of these insurers, three left the market after the cancellation of licenses as a measure of influence, one – upon application, and one insurer, which was registered in January 2022 and did not receive a single license.
“We do not observe any rapid exit of companies from the market as a result of supervisory actions of the NBU or at the request of insurers. The market is stable and continues to work in most of its participants,” Khristolyubskaya said.
She also clarified that as of September 22, 2022, licenses for insurance activities were temporarily suspended for three companies, and they were canceled for one.
According to her, as of September 1, 2022, 140 insurance companies were registered in the State Register of Financial Institutions, 13 of them specialize in life insurance.
With reference to NBU data, Khristolyubskaya also said that 91% of insurers filed reports for 2021, 96% of those entered into the State Register for the first half of 2022, and 97% of companies included in the state register for the first quarter.
At the same time, she stressed that of all segments of the non-banking financial market, the insurance market has the highest level of reporting discipline. This is a consequence of the constant communication of the supervisor with problematic insurance companies by sending requests for information disclosure and applying adequate enforcement measures.
Insurance companies ARX (UAH 810.2 million), Uniqa (UAH 669.7 million) and IG TAS (568 .9 million UAH, all Kyiv).
According to the main performance indicators of Ukrainian insurance companies published on the NBU website for 1 sq. 2022, while the leaders in insurance payments for 3 months. were Uniqa (UAH 276.4 million), ARX (UAH 271.2 million) and TAS SG (UAH 244 million).
Accrued insurance premiums under Green Card international insurance contracts concluded by the member companies of the Motor (Transport) Insurance Bureau of Ukraine (MTIBU) in January-November 2020 decreased by 28.65% compared to the same period in 2019, to UAH 1.099 billion.
As the MTIBU reported on the website, the number of Green Card contracts concluded during this period fell by 44.9%, to 554,194.
At the same time, the amount of compensations paid on claims grew by 12.14%, to EUR 15.323 million, while the number of claims paid by 4.4%, to 15,323.
The MTIBU is the only association of insurers that provide compulsory insurance of civil liability of land vehicle owners for damage caused to third parties.
The share of brokers and agents on the Ukrainian insurance market, which today reaches slightly over 2%, could significantly grow in 2019 in relation to the economic necessity and European requirements for insuring major risks, Director of Oakeshott Insurance broker (the U.K.) George Grishin said at a meeting with representatives of large business held in the residence of the British ambassador to Ukraine. According to him, if in Germany, through intermediaries, 72% of insurance contracts are concluded, in the United States, Canada – 95% in life insurance, in Italy – 76% in risk insurance and 44% in life insurance, in the U.K. – 70% and 48% respectively, while in Ukraine only 2%.
“An effective and widely available abroad tool for effective protection of possible risks, such as insurance brokerage, is undervalued in Ukraine. We have high hopes that with our active support, advocacy and activities, trust in brokers will increase in 2019 and their share of the insurance market will increase significantly,” Grishin said.
Director of Oakeshott insurance agency (Kyiv) Yuriy Hryshan said that the European directive regarding insurance intermediation notes its pivotal role on developed markets, which passed the evolutionary way from the large number of insurance companies providing similar services to fewer insurers with wider offers. The major part of insurance products is sold via insurance intermediaries. They, unlike the insurance company, which, in fact, is a supermarket with a standard set of services, make products tailored to specific customers.
Speaking about the perception of the insurance market by foreign partners, Grishin said that many cannot understand how a company that, in fact, is not engaged in insurance, is in the top five Ukrainian insurance companies in collecting premiums. This is known to all and this has been going on for many years.
The main reason for underdevelopment of the Ukrainian insurance market is distrust of both consumers and public agencies to it. “There are no investors, and no demand both for insurance products and insurance companies on the market,” he said.
He said that among the main disadvantages of the market are a large number of insurance companies which quality of assets does not correspond to the tasks set by the market; unresolved relations between company owners and top management; low level of supervision, the main reason for which is current legislation. Speaking about the market prospects in the future, Grishin said that since Ukraine is aimed at European integration, in the future Ukrainian insurers will have to meet European requirements. In particular, the size of the charter capital for risk insurance companies should be EUR 3 million, for life insurance companies – EUR 5 million.
According to Hryshan, the key principles in composing any insurance contract are: determining the insured amount in the event of an insurance event, designating all possible risks that can lead to financial losses, full confidence in the insurer, since much depends on the human factor on the financial market. “Major risks should be well placed, otherwise money is thrown out the window,” he said. According to Grishin, all European insurance is built on trust and openness between the insurer and the client. Most of any insurance contracts are customer data about themselves. “If I send a contract to a client for filling out and I see that his part about personal data and details about doing business is not filled, I know that foreign insurers will refuse to cooperate,” he said.
Oakeshott is a broker of Lloyds of London. It first was present on the Ukrainian market as direct maritime broker – since 1995 in Odesa, Mariupol and Illichivsk (now it is Chornomorsk). Since 2000, it started operating in Kyiv as representative of the British insurance broker.
