Auto insurers with Russian and Donetsk roots lost half of their clients

Insurers are weary of insuring vehicles registered in the Donetsk oblast

Photo: Reuters

Over nine months of 2014 the sellers of CASCO (casualty and collision) insurance sold 232,000 policies for the total amount of UAH 2.1 bn. The volume of insurance premiums dropped 6.5% compared with the same period last year, while the number of sold CASCO policies fell by 20%, according to statistics provided by the League of Insurance Organizations of Ukraine (LIOU).

The National Financial Services Commission still hasn’t published the data on the operation of insurance companies in the reported period. «This year the CASCO market can be described by a decline in insurance premiums, an increase in payouts and a decrease of the market share of several large players, including those with from Russia and those that actively operated in the Donetsk and Luhansk oblasts,» said LIOU President Oleksandr Zalyotov.

Bad luck for Donbas

The Donetsk-based companies Aska and Vuso registered a 47% and 21% decline in CASCO premiums to UAH 29.4 mn and to UAH 44.9 mn respectively. Even the largest insurer on the CASCO insurance market with French roots AXA Insurance collected UAH 337.4 mn premiums over the period January-September, which is 10% less than over the same period last year. «We were the leaders of retail auto insurance in the Donetsk oblast and among the leaders in the Luhansk oblast and Crimea,» says Vice President of AXA Insurance Andriy Peretyazhko. «These regions accounted for 20% of our insurance portfolio. In 2014, this business disappeared, which is why we registered a decrease in premiums.

General Director of Aska Andriy Shukatko confirms: «The Donetsk oblast accounted for 35% of our auto insurance portfolio, while today it is nearly zero.» He says that nobody insures automobile transport in the ATO zone and very few Donbas residents buy CASCO beyond this zone. However, the insurers also refuse to sell CASCO policies for automobiles registered in the ATO zone, even if the vehicle owner no longer resides there.

Russian factor

Also, the sales of Russian companies saw a significant decline. In particular, the corresponding indicators of Providna dropped by 32% to UAH 59.8 mn, Alfa-Insurance — 185 to UAH 57 mn, Prosto-Insurance — 12% to UAH 54 mn and INGO Ukraine by 7% to UAH 132.6 mn. «In this case the political factor is the key reason that had an impact on the decrease in premiums,» assured COB of the Ukrainian Insurance Group Pavlo Nelha. Many, however, think differently. «It is not likely that politics play a major role here,» says Peretyazhko. «The CASCO market shrunk this year due to the sliding volumes of sales of new automobiles by some 50% and a double decrease in financing. Also, the living standards in Ukraine took a serious nosedive.»

President of the Federation of Insurance Intermediaries Ibrahim Habidulin shares this opinion. «The price of CASCO insurance is tied to the prices of vehicles stated in hard currency. That is why automobile insurance became more expensive this year. In 2013 a policy cost UAH 10,000, while this year CASCO costs UAH 20,000. Needless to say, clients are driven away by this increase.»

Lower tariffs

In order to somehow survive on the CASCO market, insurers have begun to reduce their tariffs. «Today, a driver can buy auto insurance for 4% instead of last year’s 6% after haggling,» admits the chairman of the board of one of the companies on condition of anonymity. In corporate auto insurance the tariffs are even lower at 2-3% instead of 4-5%. «By reducing the tariffs insurers sell CASCO policies with an abridged list of risks, which is why the level of protection is also lower,» warns Zalyotov. Some companies still manage to sell full CASCO at lower tariffs. «I don’t know how they will form the reserves, because the average losses on CASCO also doubled this year due to devaluation of the hryvnia and the increased prices of spare parts,» notes Shukatko.

Emergency situation

Many insurers no longer concern themselves with this problem — they are leaving the CASCO market. «A huge re-distribution of the auto insurance segment is on the horizon. Many players will pull out of the market by the end of the first quarter of next year,» forecasts Nelha.

Some companies, for instance Allianz Ukraine, will fold retail auto insurance after fulfilling their obligations and will remain on the market of corporate CASCO insurance. Others may go without settling accounts with their clients.

In particular, Garant-Avto is experiencing problems with indemnities. Based on the results of 2013 the company was among the Top 15 auto insurers, having collected nearly UAH 76 mn in premiums. Last Friday, Garant-Avto was expelled from the Motor (Transport) Insurance Bureau of Ukraine for non-payments. It remains questionable whether the company will pay for its CASCO obligations. «The market has shrunk by at least 40%. Five to six companies will divide the lion’s share of the market between themselves,» presumes Habidulin. «They will also have to work hard to attract clients and convince them to take out a CASCO insurance policy in 2015.»