Loss ratio of life insurance for six months was at a record low

Loss ratio for life insurance in the first six months of 2023 began to fall for the first time in four years and was at a record low since 2021. Insurers are talking about a decrease in mortality due to the actual end of the pandemic. But experts primarily note the growth of credit insurance, where the level of payments is lower than in other segments. At the end of the year, they specify, the dynamics will slow down and the unprofitability of life insurance can start growing again.

From the data of the All-Russian Union of Insurers (ARIA) it follows that in January-June, the loss ratio (the ratio of the amount of insurance payments and reserves for reported losses to the premium received) of life insurance showed a decrease for the first time in four years. Thus, in January-June, the loss ratio in the segment was at the level of 63%. The indicator for the same period in 2022 was 72% against 57% in the first half of 2022. According to Andrei Chuiko, CEO of RSHB-Life Insurance, the company is indeed seeing a decrease in loss-making under life insurance contracts, primarily due to a decrease in the number of deaths caused by coronavirus infection. Other insurers surveyed did not promptly respond to Kommersant’s request.

Experts also believe that, in general, the unprofitability of life insurance in the market decreased due to the growth of credit insurance, where the level of payments is lower. According to the ARIA, credit life insurance grew by 139% year-on-year, to RUB 107 billion. Investment life insurance reached the volume of 80 billion rubles, showing an increase of 55%, endowment life insurance – by 27%, to 149 billion rubles. At the same time, the net inflow of funds (premiums minus payments) for investment-accumulative types remained relatively low – at the level of about 22 billion rubles. for all companies for the first half of the year, while last year – 29 billion rubles, follows from the data of the VSS.

Insurers note that credit insurance will continue to grow, but at a slower pace. According to ARIA Vice President Viktor Dubrovin, credit insurance will maintain 100% growth in the current year, and in 2024 growth will be at the level of 20-30%. Given that such insurance is directly related to the volume of lending, which, under the influence of a number of factors, will grow, but at a slower pace, then credit insurance will also grow, Mr. Dubrovin explains, noting that the share of mortgage insurance in life insurance is insignificant.

Due to payments on loans issued in previous years, mortgage insurance is more stable and less fluctuating depending on new loans, while in consumer lending without new loans there is no insurance, the dependence is complete, explains the managing director for ratings of insurance and investment companies ” Expert RA Alexey Yanin.

According to the Bank of Russia, in six months of 2023, the annual growth rate of the retail loan portfolio exceeded 17%, by the end of 2023 this figure will drop to 12–15%, estimates independent expert Andrey Barkhota. This will be facilitated by tighter regulation of loans to indebted customers and non-standard borrowers on secured loans, as well as rising interest rates, he estimates.

In addition, the state of the retail portfolio generated in 2022 will affect, Mr. Barhota believes. According to him, restructured loans, as well as loans sent for credit holidays, banks will be considered as potentially problematic.

A slowdown in mortgage lending is inevitable, although “it will not be so dramatic,” experts say. In particular, the largest lenders have already adapted to the tightening of regulations, hybrids of preferential programs from the state and from the developer are being scaled up, the increase in interest rates is partially offset by the possibility of refinancing mortgages, says Andrei Barkhota. The share of mortgage insurance, adds Alexander Tsyganov, professor at the Financial University under the Government of the Russian Federation, is likely to be at about the same level or slightly decrease if the growth of mortgage lending is lower or, all the more, reduced due to the growth of rates under classical programs.

Julia Poslavskaya