Insurers are cutting back their expenses

Next year insurers will have to seriously tighten their belts

Photo: Ivan Chernichkin

Next year insurance companies will cut their expenses by a third on average, President of the League of Insurance Organizations of Ukraine (LIOU) Oleksandr Zalyotov told Capital. “Companies will reduce their operating expenses, advertising and PR expenses, maintenance of back offices and also downsize their personnel,” predicts Zalyotov. Primarily insurers with domestic and Russian capital will cut back their expenses. For example, the publication learned that there are such plans in large companies such as ASKA, Providna, Asko-Donbas Severniy (AskoDS), European Tourist Insurance and others. “Over the past three years we cut our expenses by half, which is why we will continue to optimize business processes, though it is almost impossible to curtail expenses further,” admitted Chair of the Board of TAS Group Pavlo Tsaruk.

Thin year

Shrinking of the insurance market is the key reason why companies are trying to economize in the future. In 2015, insurers will collect 20-30% less payments than in 2014, according to the forecasts of LIOU. “The annexation of Crimea and the situation in the Donbas affected the volume of premiums. The insurance market will need 2-3 years to recover these losses,” says General Director of AskoDS Yevhen Matushevskiy. Next year his company is planning to reduce expenses by 40%. “We suspended operation of 16 offices in the ATO zone. They will not bring any profits, but we will also not spend money on them. Thus, we will save money,” says Matushevskiy, not ruling out the possibility of opening 1-3 new offices in other regions of Ukraine in 2015.

ASKA is also planning to cut its expenses by 30%. General Director of ASKA Andriy Shukatko says the reduction is due to the considerable decline of the volume of business due to the situation in the Donbas. In summer 2014 the company even had to transfer people from its back office located in Donetsk to Kyiv and Zaporizhzhya.

According to unofficial information Providna, which in the summer changed its owner from Russian RosGosStrakh to a consortium of unnamed European investors, is also planning to cut its expenses by a third in 2015.

Market experts believe that the Russian owners of the insurer tried to protect their business in Ukraine by way of a formal change of shareholders. If that is so, there are people in Russia who believe in the Ukrainian insurance market – according to unofficial data next year Providna should collect 140% of the current volume of premiums. The representatives of the company were unavailable for comments.

Chances slim to none

Market players believe that insurers will have very few opportunities to increase the volume of premiums by more than 10-15% next year. “Dumping may ensure a rapid increase in premiums. However, the company would thereby only deepen its problems since the unprofitability of such a portfolio will be quite high,” believes First Vice President of AXA Ukraine Andriy Peretyazhko. The insurers can also increase premium volumes by acquiring portfolios from other companies and soliciting major corporate clients from competitors.