On the verge

1st July 2008 marked the fifth anniversary of the insurers OSAGO market, which became the starting point for the development of retail insurance in Russia. Today OSAGO - vysokoubytochny insurance with very dim prospects. According to forecasts, "Expert RA", based on data from the Russian Union of Insurers, the sixth year of operation of the market OSAGO becomes completely unprofitable. Even without taking into account the forthcoming amendments, the annual combined loss ratio OSAGO (taking into account the cost of doing business and contributions to the fund SAR) on the 1st July 2009 will amount to at least 100.5%. This value of the losses facing ruin not only small insurers operating in the most unprofitable regions, but also a major market participants who sell policies OSAGO throughout Russia. Meanwhile, on the first July 2008 the lower limit of the annual loss ratio in the whole market OSAGO was equal to 73,1%, taking into account the WFD and contributions to the fund SAR - 96,1%. Territorial adjustment factors, and basic insurance rates by vehicle category is currently not fulfilling its function to equalize the loss. On a separate tariff areas and types of vehicles to the lower limit of the annual loss ratio is already at the first in July 2008 significantly exceeds the critical level (77%). Thus, the loss-making insurance taxi has reached 156.9%! Killer amendments 1st March 2009 is expected entry into force, establishing a system of direct damages and simplified procedures for issuance of an accident. The system of direct compensation for damages will encourage insurance companies to pay their customers the best possible compensation for compensation for harm caused to both property and life and health. According to estimates, Expert RA, the growth of payments due to the entry into force of amendments in 2009 will make 11,5% in 2010 - 21,8%. In turn, the simplified procedure of registration of an accident leading to a sharp increase in the number of reported minor accidents and cases of insurance fraud. All this is accompanied by increasing costs of doing business of insurance companies. According to forecasts, Expert RA, the introduction of amendments at constant rates will cause growth loss to 79.7% on July 1, 2009 (102.7%, taking into account the WFD and contributions to the fund SAR) and to 109.0% at 1 - th July 2011 (132.0%)! The global financial crisis will affect the market OSAGO not so much by reducing the growth rate of contributions as a sharp deterioration in the financial stability of its participants. If in the 2007-2008 year, auto insurers were able to align its loss-making due to the motor hull insurance, in 2009 the insurance premiums of ground transportation from damage and theft plummeted, while the proportion vysokoubytochnogo OSAGO in insurance portfolios grow. In 2009, we should expect a series of bankruptcies of insurance companies, specializes in auto insurance. Unpopular but necessary decision Five-year inflation, inadequate number of correction factors, the increase in fees and costs of doing business with the entry into force of amendments, the global financial crisis - all of this will inevitably lead to a massive crisis of market OSAGO in 2009. The crisis will be accompanied by retention payments, deterioration in quality of service and as a result, resentment and discredit all policyholders of the insurance market, which can greatly hamper the further development of retail, untapped segments such as property insurance to individuals and private insurance. The only way out of this situation - adjusting the correction factors and the increase in tariffs. The global financial crisis, increase in tariffs will lead to increased social tensions. Nevertheless, should act quickly, or as early as 2009, the growth loss may lead to withdrawal from the market OSAGO to half of its participants, and a compensation fund for all the SAR may not be enough. Unprofitability OSAGO in a number of localities with regional coefficients 0,5, 1,3 and 1 already exceeds the threshold 77% level.