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17Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal) #4(32), 2018 ЙЬШ 23
12. Вступ до публiчного адмiнiстрування : нав-чальний посiбник / Н. Л. Гавкалова, Т. А. Власенко, Л. Ю. Гордieнко та îh. ; за заг. ред. д-ра екон. наук, професора Н. Л. Гавкаловог - Харшв : ХНЕУ îm. С. Кузнеця, 2016. - 372 с. ст. 121
13. Михайлушкин П.В., Баранников А.А. Основные уровни и органы государственного управления экономикой. Научный журнал КубГАУ, №92(08). - 2013.
УДК 378
Burmaa Galaa
Associate professor of Business School, NUM
THE POTENTIAL AND PROSPECTS OF MONGOLIAN INSURANCE MARKET
Over the past 26 years, Mongolia has undergone a dramatic transition from a planned economy to a constitutional democracy and a free market economy. As part of this transition, the financial sector in Mongolia, including the insurance industry, has also been through considerable change and continues to evolve as the economy develops.
In this paper, we mentioned some challenges facing commercial insurance market and recommended some ways to solve them and to expand the market potential based on current insurance market situation and the main indicators.
Key words: Non-life insurance, life insurance, insurance market potential,insurance penetration, insurance density, gross written premium, claims paid, loss ratio.
Today, there are 17 insurers including first and only life insurer, 40 insurance brokers, over 30 loss adjusters and over 3000 insurance agents are delivering the life and general insurance products in the market.
Table 1. The number of licensed insurers and insurance intermediaries in the market
№ License holders 2010 2011 2012 2013 2014 2015 2016
1 Insurers 17 17 18 17 17 17 17
2 Insurance agents 2061 2057 2357 3187 3260 3340 3091
3 Insurance brokers 9 8 17 20 30 37 42
4 Loss adjusters 6 9 9 14 20 27 29
5 Actuaries 12 13 18 15 15 15 21
Total 2105 2104 2419 3253 3244 3436 3194
Source: FRC, Statistic report,2015
In 2010-2016, the number of license holders in market highly depending on the number of insurance commercial insurance market is increased by 60% intermediaries such as agents and brokers. which showed that there were huge expansion. According to the statisitcs, the license holders in insurance
90,0 60,0%
60,0
30,0
0,0
24,9% 23,6%
19,9% 20,9%
23,6% 21,5% 21,0% 21
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%
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20,0%
0,0%
-20,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013
2014 2015
Claims paid (Billion MNT) Gross written premium • Loss ratio (%)
(Billion MNT)
Figure 1.General informations on Mongolian insurance market Source: FRC, Statistic reports
24
Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal)#4(32), 2018
The figure shows that the insurance market potential has increased subsequently over the last 10 years. The total assets of all insurers increased 5.6 times, gross written premium increased 6.1 times and paid loss increased 3.9 times respectively in last 10 years. In fact, the loss ratio (paid loss to GWP) still remains low at
100%
60%
20%
-20%
20%-25% which is lower than developed countries with 60%-80%. And the another hint is that the premium rates are not appropriate with the covered risks.
And also there are 2 main insurance market development indicators such as "insurance penetration" and "insurance density" are computed.
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„_,-% 0-49% 0-50% 0-49%
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2005 2006 2007 2008 2009 2010 2011 2012 201.3 2014 2015
0,30%
0,00%
GDP growth, at 2005 constant rates
GWP growth, at 2005 constant prices
— GWP/GDP
Figure 2. Insurance penetration /Ratio of GWP to GDP/ Source: National Statistical Office reports, FRC, Statistic reports
The gross written premium is increased 3.6 times in last 5 years and reached to 113.9 billion tugriks. But the ratio of GWP to GDP is not increased enough or there is no real growth of insurance penetration. Insurance penetration in Mongolia is 0.5% in 2015 after Nigeria in world rank while insurance penetration in the world averaged to 6.6% and over 10% in the developed countries. Insurance density in Mongolia is 18$ while
world average is 660$, 5.000$ in UK at highest, 4.100$ in USA & Taipei, 280$ in China and 120$ in Russia respectively in 2015. Life insurance penetration of only 1-2$ indicates that life insurance is still in infancy and limited to social insurance products. Insurance density was same with Nigeria in 2015.
The main indicators of theinsurane industry:
3%
Personal insurance Property insurance Liability insurance I Financial insurance
Figure 3. Composition of gross written premium: (by classification) Source: FRC, Statistic report,2016
From the above chart, we can see that personal insurance premium income accounted for 10% (9% from short term life & health insurance produtcs and 1% from long term life & health insurance products). The
highest weight of 59% insurance premium income earned from property insurance and lowest weight of 3% is from financial insurance.
Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal) #4(32), 2018 SBäkl 25
Personal insurance Property insurance Liability insurance Financial insurance
Figure 4.Composition of paid loss: (by classification) Source: FRC, Statistic report,2016
In the figure 4, we can see that 13% of the total paid loss compensated for personal insurance claims, 42% for property insurance claims, 41% for liability insurance claims respectively. As for the liability insur-
Source: FRC, Statistic report,2015
Figure 5 shows us the insurance premium income by types in detail. 70% of the GWP earned from the 3 main products such as property, drivers mandatory liability and motor vehicle insurance. The types of life and health insurance from general insurers are few and almost limited only to personal accident and medical cost insurance.
At the end of 2015, The Mongol Insurance LLC (oldest and biggest) weighs 16%, the National Agricultural Reinsurance Company PLC weighs 15% while others weigh between 2%-6% as for total assets. The Mongol Insurance LLC earned 21.7% of the total GWP and paid 22.1% of the total loss and still leading the market. The National Life Insurance LLC weighs only 1.45% of the total GWP and 2.6% of the total paid loss. If we compute loss ratio for the company it will be 63.5% which suggests that long term life insurance products have more influence on the protection of citizens and for reducing the income risk.
In conclusion, Mongolian insurance market has:
ance lines accounts for 28% of the total premium income but for 41% of the total loss and property insurance lines accounts for 59% of the total premium income and 42% of total loss.
- Lopsided composition: (Sale of the non-life insurance products of the GWP accounts for 99.0% and the sale of the life insurance products of the GWP accounts for life insurance)
- Interest in fruitful risks: Insurance service providers are interested in to underwrite the short term profitable risks in the non-life insurance market. (15 general insurers in profit and 1 life insurer in loss in last year)
- Low loss ratio: In recent years, the loss ratio1 (paid loss to GWP) averaged to 20%-30% and loss ratio2 (paid loss to NWP) averaged to 50% which are too low as compared with developed countries with a average of 60%-90%.
- Low protection gap: However, 12.8%(356.8 thousand person)of the total population is covered in personal insurance, but only 1.0% is covered in life insurance and 15% (426.2 thousand person) is covered in liability insurance. But around 90% of them are covered in drivers mandatory liability insurance.
Ik:^ / 20,0%
i Property insurance i Motor TPL insurance Drivers mandatory liability insurance i Aviation hull insurance Other liability insurance Personal accident insurance Financial insurance CAR insurance Cargo insurance Livestock insurance Term life insurance Health insurance i Endowment insurance Pension insurance Crop insurance
Figure 5.Composition of GWP: /by types/
7.0%
26 Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal)^ 4(32), 2018 as;™!
Also we concluded that following are the challenges or problems facing current insurance market.
- Low insurance protection gap
- Reinsurance retention ratio is low
- Incomplete use of underwriting skills
- Slight differentiation between insurance contracts
- High expense ratio in insurers
Here are the some ways to recommend for the regulator and other stakeholders to solve the problems and to expand the market in the med-term.
- To support the development of life insurance
- To increase the number of mandatory insurance products
- To increase the minimum paid up capital of the insurers or to force for M&A
- To create the unified insurance information database for fraud management
- To legislate coinsurance arrangement in related acts and regulations for reducing the reinsurance retention ratio
- To enhance the public insurance awareness
References:
1. Mark S.Dorfman, 2010, "Introductiun to risk management and insurance", Prentice
Hall of India, New Delhi
2. Michael Koller,2010, "Life Insurance Risk ManagamentEssentials",EAA series-Textbook
3. Global Insurance Markets, 2015, "Economic research & Corporate Development", Munich
4. www.Insurace Information Institute,2015,In-ternational_insurancefactbook
5. www. World Insurance,2015, World_Insur-ance_Report
6. www. Europeinsurance,2015, Euro_Insurance_Report
7. www. Frc.mn, frc_imd_15 introduction04
8. www. nso.1212.mn
Inna Honcharuk
Graduate student of Department of Economic Theory of the Faculty of Economics at Taras Shevchenko National University of Kyiv, Ukraine
THE EVOLUTION OF THEORETICAL AND METHODOLOGICAL APPROACHES TO STUDY OF
MULTI-SIDED MARKETS
Abstract. The article highlights the main stages in the evolution research of multi-sided markets; analyzes the impact of the basic economic theories on the formation of the theory of two-and multi-sided markets; examines the latest trends of the research of multi-sided markets in a globalized world; analyzes the contribution of representatives of the industrial organization theory in the study of competition in the two-and multi-sided markets.
Key words: two-sided market, evolution, approaches, theory, multi-sided market.
Staging problems. Innovative achievements in the field of high technologies and digitalation of socioeconomic relations, promote the evolutionary development of market infrastructure, in particular, the formation of a new type of marketplace - a multi-sided market.
Due to the rapid development of multi-sided markets, an urgent task of economic science becomes the disclosure of their entity, features and characteristics. This foresees the research of the evolution of theoretical and methodological approaches to study of multi-sided markets with the aim of forming ideas about the effective functioning of the firms in the market, new ways of meeting needs of end-users, necessity and mechanism of their regulation by the State, the development of measures to prevent unfair competition, etc.
Analysis of recent studies and publications. Subject matter of two- and multi-sided markets is widely covered in foreign scientific literature, a significant amount of scientific publications is devoted to it. General analysis of properties and features of two-sided markets is presented in publications by M. Armstrong, J. Tirol, J. Rochet, D. Evans, etc. Study of competition in two- and multi-sided markets is considered in scientific papers of L. Jeppesen, S. Ansari, K. Boudreau, O. Kovalenko and others. The impact of innovation on the
development of multi-sided markets is explored in the works of N. Rozanova, A. Ignatyuk, A. Gryshchenko, N. Rumyantseva, S. Leibovitz, J. Farrell, C. Snow, A. Smedlund, M. Steves, D. Roberts and others.
The purpose of the research is to identify the main stages in the research evolution of multi-sided markets and the impact of the basic economic theories on the formation of the theory of two-and multi-sided markets; explore the newest directions of research of multi-sided markets in a globalized world, as well as to analyze the contribution of representatives of the industrial organization theory in the study of competition in the multi-sided market.
Research results. In the scientific literature, the notion of "multi-sided market" has started to be applied very recently, due to the complication of the infrastructure of the two-sided market and is characterized by an increase in the number of groups of market participants. That is why, to reveal its essence, it is necessary to analyze approaches to the definition of a two-sided market.
The notion of a " "two-sided market" emerged on the basis of two adjacent areas of research: the theory of networks, network connections and the theory of network effects, but was used to analyze various properties of markets.
