Russian Insurance Market Reviewed

A research consulting firm's report on the rapid development of the Russian insurance market finds that its future growth will depend on various factors such as new regulatory reforms.

New York-based Celent, a member of the Oliver Wyman Group, said other elements that impact the Russian marketplace include the population's mistrust and unawareness of insurance, the propensity of the market to further consolidate, and the level of foreign investments.

Russian insurers will have to implement initiatives in order to gain competitive advantage in this changing environment, Celent advised.

Russian insurance companies are going to spend around $2.3 billion on IT in 2011, the report said.

Insurers that can effectively improve their core processes, efficiently value new investments in information technology, and form new strategic partnerships will emerge as the new leaders, the firm predicted.

“With strong growth expected in the real life and non-life insurance sectors and the rapid development of bancassurance, insurance IT spending in Russia will almost double during the next four years,” said Nicholas Michellod, a senior analyst with Celent's insurance group and author of the report, in a statement.

Celent noted data from Swiss Re showing that the Russian insurance market is dominated by the non-life sector, with $20.9 billion in premium in 2006, compared with $571 million for the life side.

“Core insurance processes in particular are still not efficiently aligned with companies' goals and not supported by proper resources in terms of information technology,” according to Mr. Michellod.

The report advised that Russian insurers tend to believe that IT vendors do not fully understand their specific needs and therefore cannot meet their requirements.

Celent said it encouraged IT vendors as well as IT consulting firms to better communicate how they can bring added value to insurance companies.

The firm said Russian players need to adopt new technologies quickly, and notably in core areas such as claims handling, customer relationship management, and policy administration as well as distribution and sales.