Uninsured Agents in Action
In this initial quarter of the year, the earnings of intermediaries in the insurance sector have taken a substantial hit, plummeting to figures not seen since 2022. This drop can be traced back to a noticeable decrease in the sales of credit and life insurance, along with savings on agent fees due to heightened competition and growing reinsurance requirements.
By Q1 of 2025, the earnings of insurance intermediaries in the market were a staggering three times lower compared to the same period the previous year, totalling 0.6 billion rubles, according to Central Bank data. Interestingly, despite this decline in earnings, the collection of premiums for the same period outperformed Q1 of 2024 by 1.4 times, reaching an impressive 845.4 billion rubles.
The fall in earnings despite increased premiums is mainly due to the downturn in the sales of life insurance, particularly credit and investment-linked life insurance (ILS). The proportion of banking channels in the sale of insurance through intermediaries jumped by 14.7 percentage points to a dominating 51% of the total premiums. However, according to data from the All-Russian Insurance Association (ARIA), collections for ILS in Q1 of 2025 only registered a modest 5% increase compared to the same quarter in 2024. Premiums for credit life insurance in Q1 of 2025 saw a staggering 49% decrease compared to the same period in 2024, amounting to 11 billion rubles. In contrast, premiums for ILS in the first quarter of 2025 soared almost fourfold year-on-year, reaching 206.4 billion rubles, as per ARIA data.
This shift is explained by B1 partner Tatiana Samsonova, who points out that commissions in credit insurance are historically high, whereas the situation is reversed in ILS and NLS. Consequently, the decline in the segment with significant commissions, coupled with the drop in NLS, led to a decrease that ILS could not compensate for.
Experts predict the decline in earned commissions will persist as premiums continue to grow, due to long-term shifts in the industry rather than short-term incentives.
Another factor contributing to this decline is the reduction in commissions for individual agents in specific product lines, as insurance companies favour in-house sales networks and digital channels that guarantee up to 90% of sales plans, particularly for compulsory motor third-party liability insurance and property insurance for individuals and legal entities in specific regions. This move allows insurers to cut the motivation for intermediaries by as much as 15%. Neither the All-Russia Insurance Association (ARIA) nor major insurers have publicly commented on this matter.
The share of sales through individual agents has slid by 4.6 percentage points to 13.3%, according to the Central Bank's report. It appears easier for companies to trim commissions for agents than for banks because agents may remain loyal to the insurer, accepting reduced remuneration, while reducing commissions in the banking channel would mean losing a partner altogether, as the bank would cease selling low-commission products.
Major insurance companies have been strategic with respect to both growth and cost-cutting, especially in corporate insurance types. They are working to save on intermediaries due to changes in the reinsurance system and the formalization of requirements, where much is based on standards set by major insurers and the Russian National Reinsurance Company (RNRC). This leads to insurance companies limiting the involvement of brokers in contract management and loss settlement and reducing commissions, as per the belief of Alexander Tsygankov, professor at the Financial University under the Government of the Russian Federation. According to Andrei Barkhota's estimates, commissions for brokers could decrease by 15-25%. Natalia Karpova, president of RNRC, acknowledges that market participants turn to RNRC for reinsurance to cover large risks, implying that the regulations imposed by RNRC affect insurers as well.
The decline in earned commissions for insurance intermediaries in Q1 of 2025, despite an increase in premiums, is primarily due to a drop in the sales of life insurance products, such as credit and investment-linked life insurance (ILS). Moreover, the finance sector as a whole is affected, with the industry and business implications being the reduction in agent commissions and increased reliance on in-house sales networks and digital channels.
