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. Last Updated: 07/27/2016

Insurance Market Growing

The insurance market resumed growth in the second quarter of 2002, after plateauing the previous three quarters.

Total premiums in the first half of the year reached 153.2 billion rubles ($4.94 billion), up 18.9 percent from the same period in 2001, according to the Finance Ministry's insurance oversight department.

However, on a quarterly basis, the numbers were not as positive. Total premiums grew to 79 billion rubles, an increase of about 6.7 percent from 74.1 percent in from the first quarter of 2002. First-quarter premiums had dipped about 0.5 percent from the fourth quarter of 2001.

The slowdown toward the end of 2001 most likely arose as the government strove to stamp out -- and some companies promised to stop -- tax optimization schemes using life insurance policies, said Svetlana Adamovich, senior analyst at Expert Rating Agency.

Life insurance dropped about 5 percent, to 32 billion rubles from 33.7 billion rubles in the first quarter. Life insurance in the first half of the year dropped 6.7 percent from the same period in 2001.

Nonetheless, life remained the single most popular form of policy, accounting for 42.9 percent of all premiums in the first half of the year.

Experts had predicted that life insurance premiums would taper off with the introduction of the flat 13 percent income tax rate introduced in January 2001.

Mikhail Pavlov, head of international PR at the All-Russia Insurance Association, said the inadequate legal and tax base for the insurance market and companies' own lack of experience selling classical life insurance to the masses also underlie the slowdown.

Increases in property insurance and compulsory medical insurance spurred overall growth in the first half of the year.

Property insurance continues to gain popularity, primarily among enterprises, Adamovich said.

Property insurance premiums rose 64.6 percent in the first half of 2002 compared to the first half of 2001, reaching 41.2 billion rubles.

Mandatory medical insurance increased 54.4 percent year on year, to 25.5 billion rubles, much of which is government money, indicating a change in the government's attitude toward insurance, Pavlov said.

He said, however, that the government's process for selecting insurers lacks transparency and should be based on tenders.