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Sabadash K. Features of insurance market in BRICs countries be used in Ukraine



Kateryna Sabadash

 

06/04/2014

Features of insurance market in BRICs countries could be used in Ukraine

Introduction

The purpose of the following research is to reflect the specifics of insurance market in the BRICs association and identify if the experience of these five countries could be useful to implement in the Ukrainian insurance market, since it still grows and tends to occupy most of the country’s GDP.

The description of BRICs

Brics  is the acronym for an acquaintanceship of five real rising national economies: Brazil, Russia, India, China and South Africa. («New era as South Africa joins BRICS.») The gathering was initially known as «BRIC» before the incorporation of South Africa in 2010. The BRICS parts are all creating or recently industrialized nations, yet they are recognized by their vast, quickly developing economies and huge impact on territorial and worldwide undertakings; every one of the five are G-20 parts. («BBVA Research.»)

The BRICS Forum, a free universal association empowering business, political and social collaboration between the BRICS countries, was shaped in 2011. In June 2012, the BRICS countries promised $75 billion to help the giving force of the International Monetary Fund (IMF). Notwithstanding, this advance was restrictive on IMF voting changes. In late March 2013, throughout the fifth BRICS summit in Durban, South Africa, the part nations consented to make a worldwide budgetary establishment which they expected to adversary the western-overwhelmed IMF and World Bank. («Russia says BRICS eye joint anti-crisis fund| Reuters.») After the summit, the BRICS expressed that they wanted to finish the plans for this new improvement bank by 2014. In any case, question identifying with load imparting and area have backed off the understandings.

This research compares the insurance trends in all 5 countries, and reflects both negative and positive sides of their experience, and what possibilities Ukraine has to borrow some of the BRICs insurance aspects.

Insurance trends in India

By 1991 India faced with rather urgent problems concerning the economic development of the whole country. The government carried out an economic reform, which was a response to the problem of avoiding bankruptcy and payment of external debt.

The insurance has been implemented in India by the British around 150 years ago.  By the end of 20th century it got in quite a rough position — it hasn’t been reformed yet, the system needed to be improved as soon as possible. («History of insurance in India.»)

In the 91-94-ies a series of reforms concerning the establishment of the Authority supervision and regulation were conducted , and in 1995 was created the Service for Insurance Supervision.

In 1995 the life insurance market was totally nationalized.

Nowadays  the supervisory authorities appoint the top management of insurance companies, and control sources of funding. They make sure the leaders are competent, and companies have sufficient financial capacity, as insurance in India is a national character.

In addition, the supervisory authorities conduct the licensing of insurance multi- agents that must be trained (listen to 100 hours of lectures and exams).

Insurance brokers — is a rather young institution. If the future client needs to ask for advice regarding the insurance company, he goes to the insurance broker. Brokers, according to a local law, should also promptly remit payment to clients’ accounts. In addition, there are certain requirements for minimum capital of an insurance broker. In the near future India plans to create self-organized institution of insurance brokers.

Today the candidates for CFO (Chief Financial Officer) and CEO (Chief Executive Officer) can be approved only by the Supervisory Authority. Supervision also develops and approves the list of insurance products and checks them for transparency, on the other hand, according to the insurers of the law » On Insurance» are free to choose their tools of investment funds and reserves.

There cannot be any completion in the insurance sector for now, because India is the most populated country in the world after China (around 1.21 billion people) and the market is open for new companies. («Insurance Sector in India, Indian Insurance Industry, LIC, IRDA.»)

Nevertheless, despite the growing trends of India’s insurance sector, the government is very concerned about low life expectancy and high mortality in the country. According to statistics, the mortality rate among female children is much higher for male ones.

System of insurance in Brazil

Currently the Brazilian insurance market, including general insurance, personal insurance (especially life and health insurance), private pension plans is approximately 3 % of the Brazilian GDP.

The possibility of structural changes are already being discussed at various levels, including by the Congress. There are attempts to increase the size of the market, among which are leading the following aspects: breaking the monopoly on reinsurance operations , privatization of insurance against accidents at work and reduce the burden of taxes on certain types of insurance, especially life insurance. Currently, the Brazilian insurance market faces many challenges, such as, for example, fraud and increase the level of competition . Insurance companies in Brazil are working most intensively in the field of property risks. («Brazilian Insurance Market Overview — SUSEP.»)

National Council of Private Insurance (CNSP) is responsible for determining the guidelines and rules for private insurance. President CNSP — Minister of Finance, which is supported by representatives of the Ministry of Justice, Ministry of Social Security, the Federal Agency of Private Insurance (SUSEP), the Central Bank of Brazil (BACEN) and the Brazilian Securities Exchange Commission (CVM). CNSP — is an agency that also selects the direction of development in the field of insurance , compulsory insurance regulates and sets limits on insurance operations in Brazil. Reinsurance operations in Brazil within the exclusive competence (in order of monopoly ) IRB — Brasil Resseguros SA, which regulates the co-insurance , reinsurance operations and assignment of the risk. SUSEP — regulatory and inspection agency for insurance, capitalization and open market operations of private pension funds , and is responsible for issuing permits , study and intervention in the affairs of the companies in the event of a malfunction of any component market. It is also responsible for issuing permits for newly listed insurance companies,  private public entities to work with pension operations and capitalization companies, to regulate the insurance operations, approval of insurance plans that are on the market and supervision of insurance brokers, who must be accredited by SUSEP. («Insurance in Brazil : Startup Overseas.»)

Insurance practice in South Africa

The financial results of South Africa’s major insurers for the year ended 31 December 2013 are a positive reflection of the financial state of the industry. They show that the industry remains stable despite continued market uncertainty and economic turmoil during the course of the financial year.

South Africa has a competitive insurance market, with a number of direct writers having entered the market in recent years. “A potential growth area to keep an eye on is technology and the use of big data and cloud,” says Winterboer.

“With a number of countries with some of the highest economic growth rates on our doorstep, insures will continue to expand on the African continent. Together with other emerging markets, Africa will remain the area where global insurers look to grow their businesses. As these markets are not yet as competitive as the traditional local market, they offer an opportunity to earn profits at attractive levels.” («South Africa’s insurance industry – Stable despite continued market uncertainty economic turmoil- PwC.»)

Chinese Insurance Market

China is the biggest developing economy on the planet with a joined GDP of $10.17 trillion (2006 est.). The gigantic business open doors it gives have pulled in a developing number of outside organizations to put resources into China in all areas.

The protection business is one such range offering solid development prospects for western organizations eager to get included with China.

Because of China’s generally late commercialization, opening up and improvement, the protection market at present is exceptionally immature and juvenile. Then again, in the same way as other businesses in China, a round of make up for lost time and jump is continuously played at high velocity. The Chinese are gaining from created countries and are empowering advancement in key commercial ventures, for example, protection, to enhance the quality of the country.

Investment by outsiders in the protection division in China has been intensely directed as of not long ago, and even now, there are a greater number of obstructions than in some different commercial ventures. («China’s Insurance Market: Lessons from Taiwan — Businessweek.»)

Protectionist components are constantly loose quickly, and the protection business is no more forbidden to remote gurus. In any case, from the beginning of choosing to enter the Chinese protection industry, it is crucial to have a full understanding of the regulations, the key players and the business sector patterns and neighborhood conduct. What’s more, having a great information of Chinese business society, and a solid association that can speak to you and secure your hobbies is fundamental.

The Chinese Insurance advertise unquestionably has immense potential in the eyes of western safety net providers, dealers, aggregators and other protection related associations. To transform this potential into veritable returns obliges information, ability and determination.

China Consulting Ltd helped a UK insurance agency enter the Chinese showcase by structuring a Joint Venture with a nearby player.

There are some key contrasts in the protection business in China and that in most different nations. The primary is that the huge insurance agencies depend much more on unique executors than on retail outlets or merchants. Each of the vast protection firms have a tremendous system of operators who spread their own particular neighborhood protection to companions, family and people in their catchment region. Without a solid neighborhood accomplice, this makes it exceptionally troublesome for western insurance agencies to contend in comparable items offered to a comparative area of social order. («China Life.»)

 

The second distinction is that the five biggest back up plans (PICC, China Pacific, Ping A, Tian A, China United) still record for give or take 94% of the piece of the overall industry. Of these, the administration possesses an expansive extent, which implies it is troublesome to enter the business sector and take critical business sector offer. The approbation for a remote organization to work in China is controlled by the legislature and requires different strict conditions, for instance, that the organization has 30 years working history in their home market. Choices to entering as a wholly remote possessed organization might incorporate taking a stake in an existing insurance agency in China, or welcoming a Chinese insurance agency or dealer to enter into a joint wander with your organization.

Conclusion

Brics is the acronym for an acquaintanceship of five growing national economies: Brazil, Russia, India, China and South Africa. Their insurance market has just started to develop, and everything is rising. After a deep research it has got clear, that these countries have nothing in common with Ukraine. Our country is situated in the center of Europe and its international politics should be forwarded to Western Europe and European Union itself. What should be used as an example – insurance markets in Poland, Germany or France.

China and India have a really powerful economy nowadays, their main features – protectionism of their markets. This method can be used in Ukraine to support national manufacturers. The same thing is with insurance market – the government should be protective and supportive and it can be done only after making our legislative and executive bodies clear.

Russian government is corrupted and authoritarian, so there is nothing we could ever take as an example from this country, until the rights and freedoms of Russian citizens are protected and this country stops interfering into Ukrainian’s business.

South Africa is a country that impressed everyone in the world after African revolutions for freedom. The whole continent was really optimistic and waiting for a bright future, but after years of poverty and misery almost all the countries became desperate and their economy is not in the right place. Unlike the whole continent, South Africa showed a great speed of development and we should totally borrow some ideas from this outstanding country.

Brazil is famous for its National Council of Private Insurance, the government controls the insurance market, and the same thing could be done in Ukraine.

In general, these 5 countries don’t have a lot in common with Ukraine. It is a totally different mentality and numbers of citizens, all these countries are much bigger. So basically, we should be oriented into opposite side – Western Europe and use some other ideas. Move forward democracy and liberalism, because BRICs countries cannot be shown as an example of free will and less intervention of people’s lives. 

 

 

 

 

 

 

 

 

 

Works Cited

«BBVA Research.» N.p., Web. 4 June 2014.

«Brazilian Insurance Market Overview — SUSEP.» SUSEP. N.p., n.d. Web. 4 June 2014.

«China Life.» N.p., Web. 4 June 2014.

«China Life.» N.p., Web. 4 June 2014.

«China’s Insurance Market: Lessons from Taiwan — Businessweek.» Businessweek.com. N.p., n.d. Web. 4 June 2014.

«History of insurance in India.» I R D A Welcomes You. N.p., n.d. Web. 4 June 2014.

«Insurance in Brazil : Startup Overseas.» Expanding or Starting a Business Overseas — Startup Overseas. N.p., n.d. Web. 4 June 2014.

«Insurance Sector in India, Indian Insurance Industry, LIC, IRDA.» India Brand Equity Foundation, IBEF, Business Opportunities in India. N.p., n.d. Web. 4 June 2014.

«New era as South Africa joins BRICS.» South Africa’s official gateway — investment, travel, country information. N.p., n.d. Web. 4 June 2014.

«Russia says BRICS eye joint anti-crisis fund| Reuters.» Business News — Indian Stock Market, Stock Market News, Business & Finance, Market Statistics | Reuters India. N.p., n.d. Web. 4 June 2014.

«South Africa’s insurance industry – Stable despite continued market uncertainty economic turmoil- PwC.» Business Today. N.p., n.d. Web. 4 June 2014.

 

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