‘One can never be too safe’: Middle- and upper-class Russians are taking this saying seriously when it comes to protecting their pocketbooks.

When Vladimir Putin, the future president, was a deputy of then-St. Petersburg Mayor Anatoly Sobchak, his banya (sauna) on the outskirts of the city burned down. Putin barely managed to save his family. At least according to the Kremlin spin, he became a firmer believer in God after the accident. But he did not collect any insurance because he, like most Russians of his time and age, didn’t have any.

But in 2002, when the banya of a deputy director of a Moscow Oblast bank burned down, the Soglasiye insurance company paid the official about $18,000. The 90 sq.-meter building burned down completely – but it had been insured. The payment was made 12 days after the fire.

This is an indication of the growing recognition of the need for insurance coverage in Russia. But the industry is in its infancy, and ordinary Russians are still finding it difficult to insure their aging apartments. One reason is the poor state of apartments and the surrounding infrastructure, but, also, many Russians still have not been convinced that the costs involved are worth the protection. An average policy costs 0.4 to 1.2 percent of the market price of the apartment, which might be expensive for an average household with a monthly income of $200-$500.

However, things may be changing, as many companies are starting to offer new services targeted to owners of ordinary apartments. "Conditions and procedures for taking out property insurance have become more flexible," said Pavel Loginov, president of the Stolichnoye Strakhovoye Obshchestvo insurance company.

Loginov said his company has four new property-insurance products. Some of them offer full packages covering fire, explosion, flooding, natural disasters, damage from falling aircraft and illegal actions by third parties. Individual packages allow clients to choose the particular risks they want to insure against.

"Now, apartments valued at up to $20,000, country homes valued at up to $10,000, and finishings, piping and cables, etc., and household assets valued at up to $2,500 can be insured without having to be examined by a surveyor," he said. "All that is needed is documents confirming the value. The tariff policy has also become more balanced."

Insurer Number of agreements made inc. country house and building insurance Payments received, mln rubles Bonuses paid, mln rubles Rosgosstrakh 4,715,161 no data 898.9 187.1 ROSNO 29,748 14,841 37.2 15.3 RESO-Garantiya 25,784 20,468 55 18.7 VSK 25,784 no data 27 5.8 Energogarant 5,671 4,794 3.9 1.2 Inkasstrakh 5,380 3,500 1.5 0.6 YuzhUral-ASKO 5,015 4,704 2.2 0.6 AlfaInsurance 4,751 1,561 10.5 1.6 Informstrakh 3,575 3,498 3.3 1.7 Rossiya 3,001 1,681 4.4 0.5 Source: Expert RA In Moscow and Moscow Oblast, insurance costs for a country house usually come to 0.75 to 1 percent of the property’s value, even less for higher-priced homes. The owner of a house valued at $200,000-$300,000 would pay an annual insurance cost of $1,500-$2,500. The cost of insuring a house worth $1 million is 0.25 to 0.5 percent of the value, which would mean the owner would pay $2,500-$5,000 a year. If a loan is taken out to finance construction, the bank can require that the borrower take out life insurance and construction-cost insurance, as well.

Related insurance products are also surfacing in Russia, such as those for late delivery of an apartment. Prospective owners often make advance payments on units in apartment buildings that have not yet been completed. That brings up the risk that construction may not be finished by the promised deadline. Insurance is offered against the risk, costing 1.0 to 3.5 percent, depending on the state of construction when the policy is taken out.

Banks providing mortgages and loans for the purchase of apartments can demand that clients take out life insurance, insure the apartment and, perhaps, get liability insurance as well. Banks say they want to be sure the apartment stays intact and the borrower, solvent. If a borrower were to flood his apartment building or start a fire, he would be unlikely to pay the bank back, and the bank might not have anything to repossess.

According to data from the GUTA-Strakhovaniye insurance company, there are around 700 fires and 400 burglaries each day in Russia. Average annual damages from fires come to more than 2.6 billion rubles a year, and most stolen goods are never returned. "This explains why property insurance is the second-most popular type of insurance after car insurance," said Irina Zhachkina, deputy general director at GUTA-Strakhovaniye.

Insurance company representatives say insurance payments are paid immediately after the estimated value of damage is determined and after reports from experts and necessary documents from the insured person are received.

Vyacheslav Yuryev, the deputy head of Progress-Garant damage-regulation department’s client-relations unit, provided The Russia Journal with an example of the type of cases his company deals with. "In the beginning of the year, a guest house and all the property in it were destroyed by fire," he said. "All of it had been insured by Progress-Garant. Within one month, the insurance company paid an insurance benefit for the full amount, 2.4 million rubles."

He added that the average insurance payout by his company on private-property policies is 190.4 million rubles.

Insuring property rights has also become important in Russia for those buying real estate on the secondary market. Occasionally, a buyer will purchase an apartment believing that all the proper procedures have been done, only to discover that a lien was on the property because of irregularities during privatization, bequeathal, a previous sale or other transactions.

According to the St. Petersburg Realtors Association, one in every 200 transactions on the secondary market can be challenged in court, and one in every 500 cases is lost. In Moscow, courts annul 1.5 to 6 percent of purchase and rental agreements registered in the capital every year, with criminal charges filed in about 250 cases a year.

Insurance less costly than not having it

Although insuring a property can cost a homeowner a few rubles, not having it can end up costing a fortune, industry officials say, especially for high-priced apartments.

"Insuring exclusive housing requires an individualized and flexible approach," said Yury Reshetnyak, general director of the National Insurance Group. "We often end up offering owners of expensive apartments non-standard insurance. Apart from insuring real estate and finishings, we can insure valuable equipment, furniture and even precious objects and collections."

Moscow Oblast has 88,000 buildings that could be called country houses. Half of these are still unfinished, while, of the 35,000 completed houses valued at more than $75,000, only 4,000 are insured. Even if a resident feels he has insured his own apartment sufficiently, he still has to worry about causing damage to a neighbor's unit if he causes flooding, starts a fire or does structural damage during renovation work. That, insurance companies say, is where a liability policy can provide protection.

Progress-Garant’s Yuryev gave an example of when his company had covered damages when an apartment owner accidentally flooded a neighbor's unit. "The water ruined the interior finishing. Following an expert assessment of the damage, our company paid an insurance payout of 112.3 million rubles," he said.

For the owner of an exclusive apartment, the insurance cost involved is minimal, but a policy costing $100-$150 can be a real boon in the event that damage is caused to neighbors’ property, he added.

The real-estate insurance market is far from reaching the point of saturation and is developing fast, sector officials and analysts say. St. Petersburg realtors say that only 2-5 percent of all real estate there was insured last year. This year, they said they expect a boom in construction of country homes and the insurance policies related to protecting them.

As the market grows, insurance premiums will likely fall, experts say. In the next three to four years, insurers predict a gradual 10-15 percent drop in insurance costs.

The author is General Director of the Insurance News Agency