Like many other sectors of the economy, Russia’s insurance market is going through bad times: the extent of insurance is declining, and, even according to the most optimistic forecasts, the nominal growth in insurance contributions in 2016 will not exceed 5 percent, which will be easily lost to inflation. This is hardly surprising, given the decline in car sales, decline in loans issued to the population (which results in the fall of revenues from life insurance,) and the general decline in business activity.
Given this context, the issue of lowering insurance compensations is coming on the agenda. In order to do this, insurance companies are resorting to analysis by “their own” experts who undervalue damages; deliberate slowness with insurance payments, especially with regard to health insurance and life insurance on trips abroad; as well as traditional Russian formalism that demands every document to be printed on a letterhead and to bear a seal. Car owners almost always have to argue with their insurance companies about the amount of compensation for the physical damage to their car, and hire an independent expert to evaluate the cost of repair. Such a situation would be unthinkable in a civilized market: for instance, in the US any repair to an insured vehicle damaged in a car accident would be reimbursed to a maximum estimate, and the only thing the insured has to worry about is whether his or her insurance limits cover the medical costs of the injured party. But even with the exaggerated costs of healthcare in the US, insurance payments in most cases are enough to cover all the costs of the injured.
Apart from manipulations with insurance payments, insurers are increasingly resorting to recourse and subrogation–that is, demanding compensation of their expenses from the guilty party. Despite the fact that such demands have basis in the law, most Russians are not ready for such a course of action—they are caught unaware by their debt to the insurance company and refuse to pay it. The insurance company transfers the debt to a collecting agency—and these, in today’s Russia, increasingly resemble highway robbers. The media are full of horrendous stories about provocations, phone threats, moral and physical harm to debtors and their families, and even murders of debtors. Law-enforcement agencies, acting on behalf of the insurers, are opening scores of criminal cases against debtors under the popular Article 159 of the Penal Code (“fraud”), even though the Code has another Article, 177, specifically for dealing with the refusal to pay back debts. That article is rarely used, as it requires the establishment of circumstances that would qualify such action as a crime—namely, the debtor’s ability to pay back the debt. Needless to say, police has no time for such work—it has other tasks placed before it by the Kremlin.
Finally, on June 21, 2016, the notorious State Duma, which is mostly concerned with combatting the democratic opposition in Russia, adopted, in three readings, a long-awaited bill intended to regulate and civilize the work of collecting agencies. How this law will be followed in practice remains to be seen, but at least there is hope that collectors’ explicit violence toward debtors will become a thing of the past. Much will depend on insurance companies and banks—the main customers of collecting agencies that could at least be interested in improving their image among the population. Unfortunately, in times of economic crisis creditors are only interested in making a quick profit at any price—which is not surprising in today’s Russia.