We are pleased to present you with our eleventh annual survey of the Russian insurance market. In our survey we traditionally discuss how Russian insurance executives assess the near-term outlook for the local insurance market.

In 2019, total insurance premiums remained at the previous year level due to different trends in life and non-life insurance. Despite the fact that the insurance market, like the economy as a whole, is going through difficult times in the light of the coronavirus situation, according to respondents, the pessimistic scenarios1 predicted during the first weeks of the self- isolation regime do not come true. While the respondents predicted a market drop by 12% in May 2020, at the moment they see the situation more optimistically: according to some of them, the market growth can reach 5%, and the majority of respondents expect that a fall would not exceed 9%.

In May, 30% of respondents expected that 2019 results may be reached only by 2021. At the moment, the insurance companies’ forecasts have become more optimistic. However, the level of uncertainty remains very high, and forecasts strongly depend on assumptions (such as the probability of a second wave of coronavirus, economic growth rate and others).

Certainly, these unprecedented circumstances can ‘reset’ the market. The insurance executives had to change their view both on the work process and the business in general.

The current situation became an incentive to improve the online availability of insurance products and to simplify the claim settlement process. Insurers are motivated to continue development of IT-systems and increase their operational efficiency by transferring the full customer interaction cycle to online channel, by implementing machine learning in sales and using cloud technologies. There is every reason to believe that administrative costs can be reduced due to all these measures.

The most promising types of non-life insurance, according to respondents, are VMI and personal property insurance. Such expectations are quite reasonable as these products have already shown strong growth in 2019. According to the respondents the development of telemedicine, package policies for retail, policies covering infectious diseases and corporate products with deductibles will be the key long-term growth drivers for VMI. According to respondents, the possible increase in the personal property insurance is associated with the adoption of the new law on housing insurance for emergency situations.

Under current circumstances, the dynamics of the car insurance market directly depends on the new vehicle demand recovery. In addition, the positive expectations of insurers are related to further liberalisation of CMTPL tariffs. The Law2, signed in May 2020, allows insurers to take into account the driver’s individual characteristics

for the purpose of the tariff setting. This Law became another important step towards tariff liberalisation. The life insurance market expectedly declined in 2019 due to the implementation of new disclosure standards and customer dissatisfaction with low return rates on expired life investment contract policies. The companies plan to increase the attractiveness of this product by suggesting additional coverage (such as telemedicine, PA insurance, critical disease insurance, etc.). In addition, respondents are looking forward to the online sales of endowments and legal permission of selling unit- linked products.

Moreover, insurance executives have great expectations for expanding tax incentives and reducing the regulatory burden on the sector in the next 2-3 years.