Global economic crisis and its negative impacts are non-insurable events

Almost everyone has heard about the significant decreases in stocks’ values and the colossal losses that key players on the stock exchanges and investors in mutual trust funds have suffered as a result of the current global financial crisis. Indeed, one can say that stock exchanges are no longer ‘determinative’ in the financial sector. Now, with all the losses calculated and written off, the ongoing volatilities in the stock indices have become issues of secondary importance. Unfortunately, more challenging are the structural changes in the banking sector, currently invisible to most people, which pose much graver problems for the economy. Now, there is no more easy access to cheap Western loans that have hitherto fueled consumer credits, and by extension, the exponential growth in the domestic banking sector. At the same time, loans secured earlier need to be paid. Besides, several banks have closed their lending programs, while those that still grant loans have significantly reduced their credit portfolios. Even banks with sufficient funds have put their credit programs on hold, albeit at the expense of higher profits, to wait out the crisis. Consequently, funding for private and corporate clients have dwindled, the economic growth is slowing down, while the citizens’ purchasing power has fallen. Indeed, there are significant drops in key economic activities in several industrial sectors.  

On the evaluation of state’s support for businesses

The government has disbursed huge amounts of money to stabilize the economic situations and compensate for liquidity shortages. However, these measures, unfortunately, cannot fully avert the downturn in the economy, which the country is going through at the moment. Apart from the banking sector, the negative trends are also visible in the construction sector, auto dealership business, activities of producers and sellers of non-essential goods, etc. On the other hand, the Russian economy was clearly ‘overheated’ in some sectors, as evident, for instance, in the prices for real-estate properties in the country. Such situations as the cooling down in the economy, according to economists, are sometimes necessary to correct overheated markets by removing companies, which have implemented irrational policies and/or pursued investment programs directed at making huge profits today with complete disregard for tomorrow.

On the impacts of crisis on the life insurance takers’ purchasing power

It’s difficult to predict how this crisis will impact on the sale of life insurance policies. Unfortunately, there have been cases of halting production in some of the nation’s largest enterprises and massive staff reductions in others. All these factors will have negative impacts on the labor market, and consequently, reduce the citizens’ purchasing power. On the other hand, life insurance policies agents are used to selling life insurance “in a hard way” to a relatively small number of people. The only solace is in the resolute actions taken by the Russian government to stabilize economy. These actions, in combination with the huge resources accrued by the government over the years, give reasons to hope that the economic downturn will be ‘moderate’, and thus enable Russia to avoid more serious negative consequences. Indeed, today’s Russia looks like ‘an island of stability,’ especially against the background of the prevailing negative trends in most Western economies. In any case, all Russians will not lose their jobs, so, we shall definitely find our clients.

“Economic meltdowns are sometimes necessary to correct overheated markets by removing companies, which have implemented irrational policies or pursued investment programs aimed at making huge profits today with complete disregard for tomorrow.” 

On the situation in Rosgosstrakh-Life

As distinct from other companies, Rosgosstrakh-Life still plans to grow, despite this crisis. The company’s shareholders have reaffirmed their commitments to executing the development programs approved prior to the crisis, as the investment budget remains intact. As before, we still have the ambitious goal of becoming the leader on the domestic life insurance market. We shall continue to increase our sales of insurance policies, expand our geographical presence and recruit more staff. Today, we are present in 50 Russian regions, where we plan to broaden our activities by increasing the number of life insurance agents. By the way, I’ve just returned from a business trip to China, where I studied Chinese life insurance companies’ experiences. I must note that there were lots of interesting things that I learned there that could be used in our operations, such as, for instance, how to implement a system of management correctly in a company with not just a couple of dozen workers, but hundreds of thousands of employees.

On the importance of top-notched specialists 

You are completely right in noting the importance of top-notched specialists in the realization of our stated objectives. However, I need to state that our company is a perfect place to work, where every hard-working and energetic person with a purpose can build a professional career. This is especially the case today, when several financial companies are laying-off staffs, we are not reducing salaries nor changing the system of motivations. Indeed, the current situation is rather unique for our company, as it will enable us to hire more qualified workers. 

On investments into long-term insurance programs

Today, lots of people are searching for places to keep their money in order not to lose it. Confidence in the banking system has fallen because some banks are offering astronomical interest rates to attract citizens’ savings, a policy that is a source of concerns to many potential depositors. Against this background, life insurance can become an attractive and safe way for saving money, as insurance companies guarantee, as before, the payment of indemnifications as stated in the insurance policy contract, in case of occurrence of insured events. Also, all funds accumulated in life insurance programs are protected from inflation. And, in contrast to other financial instruments, we plan to declare positive investment revenues for our clients, according to 2008 financial results. Insurance premium reserves have always been, and will still be, invested, first and foremost, to protect clients’ interests. We have never run after ‘superprofits’ and, therefore, will not accrue any losses from this crisis. Besides, our company is a subsidiary of Rosgosstrakh, the nation’s largest insurance group, whose development is entirely funded from its own resources. This is an unusual situation for our country, where a 100% Russian company can become even more stable and reliable than analogous foreign corporations. And, finally, we know that we can always count on government’s help, though such aid, most probably, will not be needed.